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Income Tax - Case Laws
Showing 341 to 360 of 515 Records
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2013 (8) TMI 475 - ITAT AMRITSAR
Penalty u/s 271(1)(c) - mala fide intention - onus on the assessee to prove the genuineness of credits and justify the expenses claimed in profit and loss - Held that:- After perusing the assessment order in which the Assessing Officer has made all additions, disallowances, treating the cash credits/foreign receipts as well as the assessee's declared agricultural income merely on estimate and guess work basis without bringing on record any positive and concrete evidence to be applied against the assessee - Assessing Officer has not quoted any comparable case in this line of business, which has shown better gross profit than that shown by the assessee in the present assessment year. As stated above, the assessee has filed statement of trading account, profit and loss account, balance-sheet and audit report in Form 3CD duly signed by the authorised person. As regards the cash credits which the assessee has shown in his return, one can establish its genuineness by furnishing necessary documentary evidence but due to lack of communication by his chartered accountant the assessee could not furnish the same. As regards the foreign gift in dispute which the assessee has received from his real brother who is residing in the USA and made the gift to the assessee out of love and affection through banking channel, for that the assessee has produced all necessary evidence in the assessment proceedings. As regards to the agricultural income declared by the assessee on estimation basis, which has been converted into the income of the assessee from other sources without appreciating the Revenue's record furnished before the Assessing Officer being ancestral land as per Jamabandi available with the assessment record.
Penalty in dispute has been imposed is purely on estimation basis and the Assessing Officer has not brought any material on record to establish any mala fide intention of the assessee to evade tax in the return filed by the assessee - Following decision of CIT v. Metal Products of India [1984 (1) TMI 36 - PUNJAB AND HARYANA High Court] and Harigopal Singh v. CIT [2002 (8) TMI 65 - PUNJAB AND HARYANA High Court] - Decided against Revenue.
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2013 (8) TMI 459 - SC ORDER
Documents against show cause notice - Remission back of matter - Held that:- documents, which the appellants have now filed before this Court are of some relevance and those documents should be looked into by the High Court before it comes to a conclusion whether the appeal requires to be allowed or to be rejected - Order of High Court set aside for fresh adjudication - Decided in favour of assessee.
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2013 (8) TMI 458 - SUPREME COURT
Jurisdiction of High Court - reassessment - Writ petition filed against order passed u/s 148 - High Court quashed reassessment proceedings - Held that:- Act provides complete machinery for the assessment/re-assessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). The remedy under the statute, however, must be effective and not a mere formality with no substantial relief - If an appeal is from “Caesar to Caesar’s wife” the existence of alternative remedy would be a mirage and an exercise in futility. In the instant case, neither has the assessee-writ petitioner described the available alternate remedy under the Act as ineffectual and non-efficacious while invoking the writ jurisdiction of the High Court nor has the High Court ascribed cogent and satisfactory reasons to have exercised its jurisdiction in the facts of instant case.
Writ Court ought not to have entertained the Writ Petition filed by the assessee, wherein he has only questioned the correctness or otherwise of the notices issued under Section 148 of the Act, the re-assessment orders passed and the consequential demand notices issued thereon - Decided in favour of Revenue.
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2013 (8) TMI 457 - ITAT MUMBAI
Disallowance u/s 14A r.w.r 8D - Dividend income - investment in shares - In the instant case, shares, which yield the tax exempt dividend income, interest qua which is to be disallowed, being held as stock-in-trade, also yield share trading income, which is taxable – Held that:- The exempt income falls under Chapter III, which precedes Chapter IV, providing for the heads of income, which is only toward classifying the income forming part of the total income under different heads of income for the purpose of computing the same. The exempt income, on the other hand, does not enter the computation process and, accordingly, does not fall under, nor is required to be allocated to, any specific head of income. That is, the dividend income may well have been in law, in some circumstances, assessable as business income, to no effect or consequence. Likewise, the expenditure to be disallowed could fall under any of the sections, i.e., from section 15 to section 59. The disallowance of expenditure is governed completely by section 14A, which is a separate and complete code in itself, and as long as its ingredients are satisfied, a disallowance in its terms would follow.
Expenses are incurred during and in the regular course of business, and with a view to earn income. No direct relationship or correspondence therewith, particularly for costs other than direct costs, on account of a variety of factors, hold. A proximate relationship though exists. Even for direct expenditure, the relationship (with income) cannot be said to be linear, though we are primarily here concerned with allocation of indirect expenditure. All such expenditure is deductible and, therefore, would be required to be apportioned between the taxable and non-taxable incomes where the business generates more than one income stream, at least one of which is not taxable. Clearly, the direct expenditure would stand to be set off against the relevant income/s and the apportionment, in substance, comes into play only for the indirect expenditure.
Apportionment of expenses - Rule 8D - Held that:- There could be no quarrel with regard to the allocation of direct expenditure, which in fact states the obvious, and would in any case warrant a disallowance, i.e., even in the absence of the rule. No disallowance thereunder, in any case, has been made by the AO in the instant case.
To say that the entire interest relatable to the average share holding is to be attributed to the tax exempt dividend income would be patently incorrect on facts - Shares are bought and held primarily for share trading income, further accentuates the apparent incongruity of the situation arising on the mechanical application of r. 8D(2)(ii). Clearly, therefore, the amount as per r. 8D(2)(ii) would need to be scaled down, bifurcating the expenditure so arrived at between these two incomes - Considering that the dominant objective of the share holding, which in our view should be dispositive of the matter, is the share trading income, we propose a ratio of 20% toward the tax-exempt dividend income - As regards the ratio of such scaling down, no hard and fast rule for the purpose would hold, each fact situation being different - Already explained that an indirect expenditure, including by way of interest, has no direct relation with the income, much less its quantum, allocating it on the basis of the income generated or arising would not be appropriate, and neither does rule 8D support the same - Accordingly, in arriving at the disallowance u/r. 8D, the amount as per r. 8D(2)(ii) qua shares held as stock-in-trade would stand to be restricted to 20% thereof.
The language of r. 8D(2)(ii) itself provides the mandate inasmuch as it prescribes or authorizes a disallowance only qua investment, income from which is not taxable, so that in limiting the amount worked out with reference to the total investment; the same also yielding taxable income - The disallowance by the Revenue, per r. 8D, works to ₹ 140.69 lacs, a part of which would, as indicated above, stand to be deleted and the balance confirmed - Decided partly in favor of assessee.
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2013 (8) TMI 448 - BOMBAY HIGH COURT
Special Audit of the Trust under section 142(2A) of the Income Tax Act, 1961 - complexity of the accounts – Held that:- Assessing Officer in his reply affidavit dated 19 June 2013 has in terms denied the assertion of the Petitioner that the books of accounts were not examined and/or verified by him. - Further in the affidavit it is stated that while verifying books of accounts the Assessing Officer came to the conclusion that the audit report and the books of accounts submitted by assessee were faulty and unreliable as auditor had not reported related party transactions - At no stage prior to the filing of this petition, has the petitioner taken up the plea that the Assessing Officer had not examined the books of accounts of the petitioner.
In fact, even at the hearing before the Commissioner of Income Tax for purposes of considering grant to approval to carry out Special Audit, the petitioner's only submission as recorded in the approval letter dated 25 March 2013 was only that the accounts are not complex. There is not even a suggestion about the Assessing Officer concluding about the complexity of the accounts without having verified/examined the same - Condition precedent for exercising powers under Section 142(2A) of the said Act, viz: nature and complexity of accounts of the assessee have been satisfied.
Reliance is placed upon the decision in the case of Joint Commissioner of Income tax v/s. I.T.C. Ltd., [1999 (7) TMI 68 - CALCUTTA High Court], wherein it was held that it is not possible for an Assessing Officer to look into the accounts and to verify whether each of the entries in the accounts reflects genuine transactions if the transactions are large in number. Therefore, in such a case, looking at large number of the transactions, the Assessing Officer can ask for the approval for the appointment of special auditor - In the present facts also, the transactions are large in number as it cover 10 entities and having turnover of Rs.100 Crores. Thus, the appointment of Special Auditor in terms of Section 142 (2A) of the Act cannot be found fault with – Decided against the Assessee.
Effect of amendment to section 142(2A) vide Finance Act, 2013 - Petitioner relied upon the above provisions to contend that prior to 1 June 2013, the volume of accounts and/or doubts about correctness of accounts would not warrant a special audit. - Held that:- In any event, we need not examine the same as we are of the view that even under the unamended provision of Section 142 (2A) of the said Act, the Assessing Officer has properly exercised its jurisdiction to order a special audit after obtaining the approval of the Chief Commissioner for the same. - Decided against the assessee.
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2013 (8) TMI 447 - ITAT AHMEDABAD
Addition u/s. 40A(2)(b) of the Income Tax Act purely on the ground that the assessee has increased remuneration to its Directors - Remuneration of Rs.30,00,000/- considered as taxable under the abovementioned section 40A(2)(b) – It is submitted that It is an established fact that if working Directors are paid handsomely then only the company will earn more profit. - Held that:- Hon'ble Bombay High Court in case of CIT vs. Indo Saudi Services (Travel)(P.) Ltd. (2008 (8) TMI 208 - BOMBAY HIGH COURT) held that Revenue was not in a position to point out how the assessee evaded payment of tax by alleged payment of higher commission to sister concern since the sister concern was also paying tax at higher rate and held that disallowance of alleged excess commission paid to the sister concern was not justified. - Claim of deduction allowed - Decided in favor of assessee.
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2013 (8) TMI 446 - ITAT AHMEDABAD
Term ‘make available’ in DTAA - 'Fees for Technical Service' is a consideration received in the hands of the recipient, provided, those technical knowledge or know-how etc – Held that:- 'Make available' means to allow somebody to make use of the know- how or knowledge. This has been further expanded that 'make available' means that the person receiving the services has been enabled to utilise that knowledge or the receiver has become wiser to utilise that knowledge independently – Relying upon the various judgments, mere rendering of services is not enough unless the person utilising the knowledge is able to make use of that technical knowledge by himself for his own benefit independently i.e without the guidance of the said service provider.
The term of the agreement is for period of 10 years - In this long period that knowledge shall become part of the system and the persons using that knowledge may themselves become expert. So the technical persons using that knowledge are required to be interrogated - All these questions can only be answered by a thorough investigation at the level of the assessment. The A.O. shall therefore examine the bills and vouchers prepared by the assessee in support of the claim of expenditure to ascertain the nature of services rendered and then find out that whether could have been made available for the business purpose of those parties.
Taxing the reimbursement of expenses as 'Fees for technical services' under Article 12 of the India-Netherlands Tax Treaty – Held that:- In the written submission, the learned A.R., MR. Dhinal Shah has submitted that the appellant has received ₹ 95,10,671/- as reimbursement of expenditure from SHGPL in the course of rendering services. The assessee has, therefore, required to establish that those expenditures were first incurred out of pocket expenses then only the question of reimbursement can be decided. The assessee is, therefore, required to furnish the details of the bills through which the reimbursement was claimed since all those facts were not earlier examined by the Revenue Authorities, therefore, the natural justice demands to restore this issue back to the stage of the AO to be decided de novo as per law.
Higher of the amounts mentioned in the transfer pricing certificate – Held that:- Information was gathered by AO under Section 133(6) from all those parties and thereafter arrived at a figure - If there was a difference due to foreign exchange fluctuation, the same is a matter of simple rectification. Since, no legal issue has been raised through this ground, therefore, no force is found in this ground of the assessee - Decided against the Assessee.
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2013 (8) TMI 445 - ITAT MUMBAI
Non Deduction of TDS - Nature of payment - Head Office expenditure or Royalty – Held that:- Action of the revenue authorities on treating the amount being in the nature of royalty and hence not allowable under section 40(a)(i) cannot be allowed - By no standard this amount can be considered as royalty as a consideration for the use of the assets specified under Explanation 2 to section 9(1)(vi). This amount is in the nature of head office expenses - It would be in the interest of justice if the impugned order on this issue is set aside and the matter is restored to the file of the AO – direction is given to the AO to consider the deductibility or otherwise of such amount by treating it as head office expenses.
Invocation of Section 14A read with exemption under section 10(15) and (33) – Held that:- After noticing that the funds for investment in securities fetching exempt income were out of own funds, it has been held that no disallowance under section 14A on account of interest is called for. As regards the amount of other expenses disallowable, tribunal has upheld disallowance @ 2% of exempt income.
Rate of Tax - Article 26 of the DTAA with France - claim of the assessee that tax to imposed as per rate of tax applicable to Indian Banks - Permanent establishment (PE) - Held that:- CIT(A) has sustained the order of the AO by applying rate of tax @ 48%, instead of 35% as asked for by the assessee. Now that the assessee has accepted that the coordinate Bench of Kolkata has dealt with the issue and for the reasons mentioned therein, the AR accepts the rate as applied by the AO. - Decided against the assessee.
Allowance of broken period interest as expenditure – Held that:- Similar issue was there in the appeal for the immediately preceding year and the Tribunal, following its decision for assessment year 1991-92, has decided this issue against the Revenue. In view of the fact that the facts and circumstances for the previous year relevant to the assessment year under consideration are similar and no distinguishing feature has been brought to our notice by the learned Departmental Representative, respectfully following the precedent, impugned order on this issue is upheld, by directing that the interest paid in respect of the broken period be set off against the interest received in respect of the broken period.
Income tax chargeability on writing off provision of of bad debts - section 41(1) – Held that:- When the provisions for doubtful debts were added back in the computation of income in the respective years, there is no question of taxing them again in the year when they are written back.
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2013 (8) TMI 444 - ITAT JODHPUR
Partial deletion of trading addition - A.O. made trading addition by applying higher profit rate after rejection of books of accounts - CIT partially deleted addition and sustained partial addition by applying other profit rate - Held that:- CIT(A) on the one hand accepted the net profit rate declared by the assessee and on the other hand sustained ad hoc addition without pointing out any specific leakage or shortcomings in the net profit - addition sustained by learned CIT(A) was not justified particularly when he was of the confirmed view that when the assessee had shown better results in the current year, the other related omissions/shortcomings towards books of account became insignificant and redundant, therefore, no trading addition could have been made in such a situation - Decided against Revenue.
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2013 (8) TMI 443 - ITAT MUMBAI
Fees for technical services - Fees received for consulting and engineering services - Article 12 - DTAA with USA - Held that:- Technical services provided by the assessee in the shape of technical plans, designs, projects, etc. are nothing but blueprints of the technical side of mega power projects. Admittedly such services are rendered at a pre-bid stage. It is quite natural that such technical plans etc. are meant for use in future alone if and when L&T takes up the bid for the installation of the power project. When the otherwise technical services provided by the assessee are of such a nature which are capable of use in future alone - there is no infirmity in the impugned order holding that the assessee received consideration for making available technical services within the meaning of Article 12 of the DTAA. - Decided against assessee.
Interest u/s 234B - Held that:- assessee is tax resident of USA. Its entire income is liable for deduction of tax at source in India. In that view of the matter, it is obvious that there can be no chargeability of interest u/s 234B of the Act - Following decision of D.I (International Taxation) VS. NGC Network Asia Ltd [2009 (1) TMI 174 - BOMBAY HIGH COURT] - Decided against assessee.
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2013 (8) TMI 442 - ITAT MUMBAI
Determination of the Arm's length price - TPO made addition on account of difference of Arm's length price - Held that:- The adjustment, if any, should be limited to the AE transactions - even applying the mean margin taken by TPO, the difference in the ALP would be much less than 5% of the AE transactions - Decided in favour of assessee.
Disallowance under section 43B - Held that:- disallowance under section 43B cannot be made even in respect of employees contribution if the same is paid before due date of filing the return - no part of Provident Fund can be disallowed whether it relates to employees contribution or employers contribution, if the payment is made before due date of filing the return. Here it is the case of the assessee that all the payments have been made before the due date of filing the return. To verify such contention of the assessee the matter is restored back to the file of AO with a direction that if the payments are made before due date of filing the return no disallowance should be made - Decided in favour of assessee.
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2013 (8) TMI 441 - ITAT JAIPUR
Deduction u/s 37 - Provision for PACS Managers’ salary - Allowability of contribution by the Apex Bank for PAC Mangers salary is a statutory liability which is crystallized at the end of every year. The contribution however, once made become at the disposal of Registrar of Cooperative Society which is payable as and when demanded by the Registrar Cooperative Society along with interest on it. Thus, it is not contingent liability but a statutory liability which is crystallized at the end of every year and hence the liability is allowable - amount is to be contributed to a fund and the fund is not being managed by the assessee. The assessee may be trustee of that fund but it cannot apply the fund as per his own will. The interest, if any, earned on this fund is also to be credited to that fund, it is therefore, clear that funds stand diverted at the source and therefore, this cannot be considered as an appropriation of income but it is an expenditure - Following decision of Sri Venkata Satyanarayana Rice Mill Contractors Co. vs. CIT [1996 (10) TMI 2 - SUPREME Court] - Decided against Revenue.
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2013 (8) TMI 440 - ITAT CHENNAI
Disallowance u/s 14A - Expenses incurred for earning exempt income - CIT granted partial relief - Held that:- The appellant had sufficient own funds and internal accruals to meet its investments. The share capital was ₹ 2,55,04,750/- and the set apart as prepaid costs and could not be allowed as expenditure for the year. He arrived the value of such prepaid cost at ₹ 4,93,170/- and disallowance the same as it was not incurred wholly and exclusively in respect of the business carried on during the year. He also stated that the addition was agreed to by the authorized representative of the assessee - Decided against assessee.
Disallowance of repairs and replacements - CIT allowed deduction u/s 37(1) - Held that:- repairing and replacing the existing components of portion of the buildings, furniture and buildings cannot at all be stated to be of enduring nature but such expenditure would fall in the category of revenue expenditure allowable as deduction under sec.37 of the I.T. Act - Following decision of CIT v. Ooty Dasaprakash [1998 (2) TMI 77 - MADRAS High Court] - Decided in favour of assessee.
Disallowance of annual maintenance charges - Revenue or capital expenditure - Held that:- Disallowed the expenses which pertained to the subsequent period. The rule of taxation rests on the matching principle in which cost incurred to earn revenue is recognized as expense in the period when related revenue is recognized as earned. The A.O. has rightly applied the matching principle and the portion of AMC expenses which does not relate to the maintenance costs for the year was rightly disallowed - Decided against assessee.
Deduction under sec. 80IA - CIT granted deduction - Held that:- whether initial assessment year in section 80-IA(5) would only mean the year of commencement and not the year of claim ? - Unabsorbed depreciation - Held that:- Assessee has been setting off the loss against the income of the company for the earlier years. During the assessment year, the assessee exercised the option claim of deduction under section 80-IA of the Act. But the Assessing Officer denied the exemption on the finding that loss or depreciation already allowed and set off against other sources of the income of the assessee has to be notionally carried forward and set off against the current year's income from the units for which the assessee is claiming deduction under section 80-IA. There is no dispute that during the year, there is a profit. Therefore, the assessee claimed deduction under section 80-IA and the Revenue has no authority to notionally bring forward the unabsorbed depreciation and loss of the earlier year which has been already set off as against the current year profit from the unit - Following decision of Velayudhasamy Spinning Mills P. Ltd v. ACIT [2010 (3) TMI 860 - Madras High Court] - Decided in favour of assessee.
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2013 (8) TMI 439 - ITAT CUTTACK
Validity of assessment orders - Assessment orders server after expiry of period of limitation - the assessment orders in these cases though made on December 31, 2009, those were served on the assessee on May 10, 2010, i.e., after 130 days from the date of order. - Held that:- It is found that undisputedly the assessment orders though passed before the period of limitation contemplated under the relevant provisions of law, the copies of the orders were served to the assessee after the expiration of the limitation provided under the relevant provision. - assessments are barred by limitation - appeals of the assessee are allowed on question of law - Following decision of Shanti Lal Godawat v. Asst. CIT [2009 (7) TMI 829 - ITAT JODHPUR] and K. Joseph Jacob v. Agricultural Income-tax Officer [1990 (11) TMI 75 - KERALA High Court] - Decided against Revenue.
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2013 (8) TMI 438 - ITAT CHANDIGARH
Deemed dividend u/s 2(22)(e) - Computation of shareholding - Whether for applying the provisions of section 2(22)(e) of the Act the cumulative holding of the assessee-firm and its partners is to be considered or the shareholding of the firm in isolation is to be considered - Held that:- assessee-firm holds only 1.07 percent shares of the sister-concern, whereas the partners of the assessee-firm holds 6.64 percent and 6 percent shareholding respectively. The Assessing Officer had observed that the cumulative holding of both partners of the assesseefirm being more than 10 per cent., results in application of the provisions of section 2(22)(e) of the Act. Undoubtedly, the assessee-firm on its own is holding only 1.07 percent of shareholding in the concern - assessee-firm in the present case is holding less than 10 percent of shareholding, any amount advanced by closely held company to the assessee-firm is not to be treated as deemed dividend under the provisions of section 2(22)(e) of the Act, irrespective of the fact that the shareholding of the firm to whom advance had been made and the partners of the said firm have shareholding more than 10 percent of the said concern, which had advanced the amount - Following decision of CIT v. Hotel Hilltop [2008 (3) TMI 310 - RAJASTHAN HIGH COURT] and Asst. CIT v. Bhaumik Colour P. Ltd. [2008 (11) TMI 273 - ITAT BOMBAY-E] - Decided against Revenue.
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2013 (8) TMI 437 - ITAT CHANDIGARH
Revision u/s 263 - Adjustment made u/s 145A to the closing stock on account of excise duty - Held that:- In respect of the first objection of the Commissioner of Income-tax visa-vis the provisions of section 145A of the Act, the assessee had furnished audit report under which it has been certified that after the so-called adjustment made under section 145A of the Act, there was nil effect under the modvat account - Assessing Officer had not raised any query in respect of the provisions of section 145A of the Act. After the amendment to the said section 145A of the Act certain adjustments on account of excise duty to opening stock, purchases, sales and closing stock have to be made - The powers under section 263 of the Act are to be invoked on satisfaction of twin conditions of the order being both erroneous or prejudicial to the interests of the Revenue. Where the tax effect because of an order passed by the Assessing Officer is nil, such order even if erroneous being not prejudicial to the interests of the Revenue, is not open to revision under section 263 of the Act - Decided in favour of assessee.
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2013 (8) TMI 436 - ITAT DELHI
Exemption u/s 11 - Withdrawal of Registration u/s 12A - Creation of FDR - Unspent grant received for specific purpose - CIT granted exemption and registration - Held that:- The assessee can be covered only under clause 13(3)(e) only when the persons mentioned in section 13(3)(a) to 13(3)(d) have substantial interest in the society which is not the case here. Ld. Commissioner of Income Tax (Appeals) has also rightly observed that perusal of the auditor report and audited balance sheet it was seen that fact regarding the pledging of FDRs has been mentioned in the Notes to Account attached with balance sheet which are prepared by the assessee only for the purpose of disclosure. This cannot be said to be disqualification of the auditors in the report. In these circumstances, it is apparent that the assessee’s funds have not been parted away as the FDRs were lying intact in the bank, the assessee has received interest thereon and got the maturity proceeds in the next year - therefore, assessee is eligible for exemption u/s 11 of the Act - Decided against Revenue.
Unspent grant received for specific purpose - Held that:- Assessee has maintained separate accounts for each project and grant and has given complete details regarding the same in the audited balance sheet itself. The Assessing Officer did not point out any discrepancy in the said details and brought nothing adverse to prove its allegations - Therefore, unspent grant cannot be taxed as voluntary contribution or income u/s 12 of the Act - Decided against Revenue.
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2013 (8) TMI 421 - ITAT DELHI
Adjustment in regard to marketing support services segment - Non reduction of suo motu disallowance of commission expenses - Held that:- commission expenditure which have been disallowed were payments claimed to be made to local dealers for assistance in procuring orders for the products of the assessee's associated enterprises from the Indian customers - Dispute Resolution Panel mistakenly written amount of profit of assessee - Transfer Pricing Officer has wrongly computed the margin of the assessee at 1.35 percent and if the said correction is made then the profit margin will be 9.63 percent - it cannot be said that commission expenses which have been suo motu disallowed by the assessee were not claimed as operating expenses while computing the arm's length price. If they are subsequently disallowed suo motu by the assessee in the revised return, they are required to be excluded from the operating cost and the calculation of the assessee should have been accepted that its profit margin should have been taken according to the income computed in the revised return for which the assessee has also paid the due taxes - Decided in favour of assessee.
Rejection of three comparables out of five comparables selected by the assessee - Non availability of the current year's financial data - Held that:- only current year financial data is relevant for determination of the arm's length price - sub-rule (4) of rule 10B clearly states that the data to be used in analysing the comparability of an uncontrolled transaction with an international transaction shall be the data relating to the financial year in which the international transaction has been entered into. The proviso carves out an exception that the data relating to a period not being more than two years prior to such financial year may also be considered if such data reveals facts which could have an influence on the determination of the transfer price in relation to the transactions being compared - Following decision of Mentor Graphics (Noida) (P.) Limited. Versus Deputy Commissioner Of Income-tax, Circle 6(1), New Delhi [2007 (11) TMI 339 - ITAT DELHI-H] - Decided against assessee.
Determination of arm's length price - Only one comparable taken as basis - Held that:- Four comparables were involved in different lines of business and, therefore, did not meet requirements of rule 10C, which was a major factor in judging comparability of a case – on facts, ALP was to be determined only on basis of remaining one comparable - proviso as it existed for the relevant assessment year states that where more than one price is determined by the most appropriate method, ALP shall be taken to be arithmetical mean of such price, or, at the option of the assessee, a price which may vary from the arithmetical mean by an amount not exceeding 5 per cent of such arithmetical mean - provision is applicable where more than one price is determined by the appropriate method - Following decision of Vedaris Technology (P.) Ltd. Versus Assistant Commissioner of Income-tax [2010 (3) TMI 898 - ITAT DELHI] and Perot Systems TSI (India) Ltd. Versus Deputy Commissioner of Income-tax, Circle-14(1), New Delhi [2009 (10) TMI 638 - ITAT DELHI] - Decided against assessee.
Exclusion from operating expenses - Expenses incurred prior to the commencement of manufacturing activity - Held that:- what are operational expenses are the expenses which are incurred to earn that income. It is not even the case of the assessee that those expenses did not relate to manufacturing segment of the assessee out of which the revenue was earned by the assessee. If the expenses have nexus with the revenue then they are to be considered as operational expenses and they cannot be excluded simply for the reason that the date of occurrence of the revenue is later and expenses have been incurred prior to that - Decided against assessee.
Deviation from net profit shown in books - Held that:- There cannot be any deviation in the net profit shown in the books of account and adjustment, if any, can be made to the same to eliminate the material effects of such differences to the extent these adjustments are reasonably accurate. Therefore, the position emerges is that the adjustments can be granted to the assessee in computation of the mean margin only to the extent of these being reasonably accurate - Decided against assessee.
Computation of profit margin - Adjustment on capacity utilisation - every person who has entered into an international transaction is under an obligation to keep and maintain the information and documents with respect to the assumptions, policies and price negotiations, if any, which have critically affected the determination of the arm's length price. The Transfer Pricing Officer in its report has observed that the assessee did not submit any evidence for assuming the capacity utilisation of the comparables and whatever data relied upon by the assessee for seeking capacity utilisation adjustment was either unreliable or incorrect. When fixed cost itself is incurred only for a part of the year the same cannot be adjusted for differential capacity utilisation - Therefore, decided against assessee.
Arm's length price determined on application of the most appropriate method is only an approximation and is not a scientific evaluation. Therefore, the Legislature thought it proper to allow marginal benefit to cases who opt for such benefit. In the case of a taxpayer who exercises the option and accepts the arm's length price as per the second limb of the proviso or in other words, he accepts the arm's length price even exceeding 5 percent of arithmetic mean determined by the tax authority as correct and is ready to pay tax on the difference between price disclosed by him and the above arm's length price. We do not see any valid objection on the part of the Revenue to the application of the above provision to such a case - Therefore, 5 percent is not available to the assessee with respect to marketing support service segment and it is available to the assessee with regard to manufacturing segment - Decided partly in favour of assessee.
Disallowance u/s 40(a)(ia) - It has not been shown by the assessee that how these expenditure, which are claimed as provision, had accrued in the year under consideration. No details whatsoever have been filed in the paper book as no reference in the written submission regarding evidence has been made - There being no evidence on record to prove that these provisions were not in the nature of contingent liability - Decided against assessee.
Depreciation - Whether printers and UPS can be classified as computer entitled to depreciation at 60% or have to be classified as general plant and machine entitled to depreciation only at 25% - Section 32, which grants depreciation allowance, does not define the word ‘Computer - As per the General Clauses Act, 1897, if a particular word is not defined in the Central statute then meaning given to such expression under General Clauses Act may be considered for guidance and adoption in the former enactment - Thus in order to determine whether a particular machine can be classified as a computer or not, the predominant function, usage and common parlance understanding, would have to be taken into account - In the case of ITO Vs. Samiran Majumdar [(2006) 280 ITR (AT) 74 (Kol.)] ITAT, Kolkata Bench - Held that when a device is used as part of the computer in its functions, then it would be termed as a computer - Decided in favour of assessee.
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2013 (8) TMI 413 - ITAT DELHI
Application of section 50C of the Act to the transfer of leasehold rights in the industrial plot - The assessee had transferred leasehold rights in the plot of District Industrial Centre, Rampur to Shri V.K. Gupta as per directions/terms or consideration of district Rampur and paid stamp duty of Rs.3400 and also got registered agreement from some Registrar, Tehsil Sadar, Rampur on 14.3.2007 - Assessee got a leasehold plot from District Industrial Center, Rampur for lease of 99 years for setting up an industrial unit. The assessee obtained required permission from the concerned authorities for transfer of leasehold rights after making payments of dues and transfer charges – Held that:- The assessee had transferred leasehold rights in the plot of District Industrial Centre, Rampur to Shri V.K. Gupta as per directions/terms or consideration of district Rampur and paid stamp duty of Rs.3400 and also got registered agreement from some Registrar, Tehsil Sadar, Rampur on 14.3.2007 - Assessee was having only leasehold rights and it had no absolute right to sale, exchange or relinquish the property. As per recital of the original lease deed, actual rights were in the hands of General Manager of District Industrial Center on behalf of Government of U.P - The triparty agreement was executed between the assessee, Shri V.K. Gupta and General Manager, District Industrial Center, Rampur on behalf of Govt. of UP and the deed was executed after granting approval by the District Magistrate, Rampur with certain conditions mentioned in the approval/permission.
Assessing Officer did not give any finding to the fact that the assessee received additional consideration in addition to the consideration mentioned in the sale agreement and also the Assessing Officer did not gather any material to establish with cogent evidence that there was evasion of tax by suppressing or concealing the true and correct consideration of transaction - Addition made by the Assessing Officer on the basis of circle rate gathered from Sub-Registrar office of Rampur showing circle rate of properties cannot be applied as there was no application of section 50C in the case - Decided against the Revenue.
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2013 (8) TMI 412 - ITAT DELHI
Intention of the assessee, whether an assessee has made investment in shares or it was an adventure in the nature of trade - To discern the intention of the assessee, whether it has made investment or just on account of change of law, it is trying to convert its stock-in-trade as investment – Held that:- In the light of tests laid down in the case of Sarnath Infra- structure Pvt. Ltd. vs. ACIT reported in [2007 (12) TMI 261 - ITAT LUCKNOW-B], facts of the present case was examined and it was revealed that assessee has not converted its stock-in-trade into investment, just after the announcement of change in the tax rate on short term capital gain. It has been independently making purchases, which are shown as investment in the investment registered. It has took the delivery of shares, this aspect was specifically pleaded before the CIT (A) and it has been accepted. It has not used borrowed funds for making investment. The AO has not pointed out this aspect in the assessment order also. The shares have been valued at cost at the end of the year, while closing the accounts. The Board had passed the resolution for investment in the month of January, some of the shares were old shares on which short term capital gain has been declared, they were appearing in the opening stock as investment. Thus cumulative setting of all these factors suggest that assessee had made investment in the shares – Decided in against the Revenue.
Allowance of security transaction tax – Held that:- Deduction of security transaction tax is not admissible to the assessee, once its claim of short term capital gain is accepted – Decided against the Revenue.
Disallowability of deduction under section 14A of the Income Tax Act – Held that:- If it is not possible for the AO to pin point any specific expenditure from the accounts relatable to earning of exempt income then he would look into surrounding circumstances – AO is directed to re-adjudicate this issue, keeping in view the judgment of Hon'ble Delhi High court in the case of Maxopp Investment Ltd. Vs. CIT [347 ITR page 272].
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