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2014 (10) TMI 393 - AT - Income TaxTreatment of rental income on leasehold premises - Sub-letting of property - AO treated it as income from house property – Held that:- Following the decision in Stream International Services (P.) Ltd. Versus Assistant Director of Income-tax (International Taxation) - 7(2), Mumbai [2013 (9) TMI 339 - ITAT MUMBAI] - the assessee was neither the owner nor the deemed owner of the house property, applying the provisions of section 22, the annual value of such property could not have been charged to tax under the head "Income from house property" - As it was a case of simple subletting or property, not facilitating the carrying on of the assessee's business in any manner, the rental income so realized by the assessee in the present circumstances cannot be considered as 'Business income' - In such a situation, it was directed that the same should be included under the head 'Income from other sources' - The impugned order on the issue was set aside and the matter was restored to the file of the AO for doing the needful accordingly - The Assessing Officer will allow eligible deductions and allowances as per the relevant provisions under Chapter IV-F - While allowing such deductions, the Assessing Officer will also ensure that no deduction is doubly claimed/allowed, firstly, in computing of income under the head "Profits and gains of business or profession" and then under the head "Income from other sources" – Decided in favour of assessee. Exempt income earned as dividend disallowed u/s 14A – Held that:- Following the decision in GODREJ AND BOYCE MFG. CO. LTD. Versus DEPUTY COMMISSIONER OF INCOME-TAX AND ANOTHER [2010 (8) TMI 77 - BOMBAY HIGH COURT] - application of Rule 8-D is prospective and is applicable from AY 2008-09 - the DRP has considered the disallowance of 5% to be reasonable - the AO has not appreciated the directions of the DRP correctly, may be directions was not clear – the AO is directed to restrict the disallowance u/s 14A of the Act to 5% of the exempt income – Decided in favour of assessee. Transfer pricing adjustment – Determination of ALP – Selection of comparables – directors of companies selected involved in serious fraud cases - Held that:- Assessee rightly contended that the company deserves to be excluded as the Directors of this company were involved in fraud, therefore, financial results of the company are not reliable –relying upon Capital IQ Information Systems (India) (P.) Ltd. Versus Deputy Commissioner of Income-tax (International Taxation) [2014 (3) TMI 626 - ITAT HYDERABAD] - whenever a company or its directors are found to be involved in fraud, exclusion of such company is upheld from the final list of comparables as the financial results are not reliable – thus, those company cannot be treated as comparable. Infosys BPO Ltd. – Extremely high turnover – Held that:- The turnover of this company is extremely high as compared to that of the assessee - Infosys is a brand and commands premium in the market, therefore, this company should be excluded from the list of comparables - Infosys is a brand and commands premium in the market - the turnover for the year of this company was ₹ 649.56 crores as against that of the assessee of ₹ 54.17 crores which is almost 12 times of the assessee - Infosys BPO Ltd. is a joint company and it assumes significant business risks unlike the assessee who does not assume significant risks therefore deserves to be excluded from the final list of comparables – the company is directed to be deleted as comparable. Caliber Point Business Solutions Ltd. – Related party transaction – Held that:- The related party transaction is more than 25% which is a filter adopted by the TPO himself - the DRP has not considered this objection because it was of the opinion that related party transaction is mainly for reimbursements and recoveries and therefore would not affect the company - as decided in assessee’s own case for the earlier assessment year, it has been rightly held that a pure reimbursement of expenses by one AE to another AE is very much a ‘transaction’ as per section 92F(v) and consequently is equally an international transaction as per section 92B requiring consideration as per section 92 of the Act – this company cannot be treated as comparable.
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