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2015 (5) TMI 930 - AT - Income TaxTransfer pricing adjustment - DRP directing AO to delete the disallowance made on account of transfer pricing adjustment involving payment of share application money - Held that:- This issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessee’s own case for assessment year 2008-09 wherein it was held by the Tribunal relying on its earlier decision in the case of Vijay Electricals Ltd. V/s. Addl. CIT (2013 (7) TMI 804 - ITAT HYDERABAD) that the amount representing investment made by the assessee company in share capital of its subsidiary outside India was not in the nature of international transaction, as referred to in S.92B of the Act, and therefore, Transfer Pricing provisions were not applicable to such transactions. Thus we uphold the impugned order of the Dispute Resolution Panel directing the Assessing Officer not to make any addition on account of transfer pricing adjustment in respect of the transactions of the assessee company with its AE, involving payment of share application money - Decided in favour of assesse. Disallowance of expenditure incurred on staff welfare and others - DRP allowed the claim - Held that:- Similar issue was involved in the case of the assessee for the assessment year 2008-09 wherein held that the department cannot disallow the expenditure merely because there is a clerical error in the bills produced by the assessee towards the expenditure.It was held that if the expenditure is not claimed by M/s. Maytas Properties Ltd., it is fair to allow deduction towards business expenditure in the hands of the assessee. Accordingly, the issue was restored by the Tribunal to the file of the Assessing Officer to verify whether the same expenditure was claimed by M/s. Maytas Properties P. Ltd. and if it is found, on such verification that there is no such double claim, the Assessing Officer was directed by the Tribunal to allow the claim of the assessee of such expenditure - Respectfully following the said decision of the coordinate bench of this Tribunal in assessee’s own case,we uphold the impugned order of the Dispute Resolution Panel - Decided against revenue. Disallowance of expenditure for which payments were made in cash - DRP directing the Assessing Officer to restrict the disallowance only to the extent of 10% - Held that:- this issue is also squarely covered by the decision of the Tribunal in assessee’s own case for assessment year 2008-09, which has been relied upon by the Dispute Resolution Panel to give relief to the assessee on the similar issue involved in the year under consideration, i.e. assessment year 2009-10 - Decided against revenue. Addition of interest allegedly attributed to the advances given by the assessee company to its group concerns - DRP deleted the addition - Held that:- all the material facts relevant to this issue as involved in the year under consideration are similar to assessment year 2008-09 in as much as the assessee company had interest free funds in the form of customer advances amounting to ₹ 556.36 crores and debentures and CCDs amounting to ₹ 600 cores, which were sufficient to give the interest free advances to the subsidiaries as well as other companies. - Decided against revenue. Disallowance of expenditure for construction work - DRP allowed the claim - Held that:- The issue involved in the year under consideration as well as all the material facts relevant thereto are similar to assessment year 2008-09, we respectfully follow the decision of the coordinate bench of the Tribunal and uphold the impugned order of the DRP giving relief to the assessee on this issue as the entire payment to sub- contractor shall not be disallowed as there is evidence on record for such payment. More so, the assessee has produced payment details and it has been subjected to tax deduction. Being so, considering the totality of the facts and circumstances, we are inclined to allow the claim of the assesse - Decided against revenue. Income recognition - change in the method of recognition of income based on registration of agreements for sale or completion of possession and consequential reversal of revenue on cancellations/legal cases - Held that:- As relating to the estimation of budgeted cost for the purpose of determining percentage of completion of project, the same is squarely covered by the decision of the Tribunal in assessee’s own case for assessment year 2008-09, wherein it was held that the percentage of completion is required to be worked out on the basis of budgeted cost of construction, as revised from time to time, depending on the facts of the case. Respectfully following the said decision of the Tribunal in assessee’s own case for assessment year 2008-09, relevant portion of which is extracted hereinabove, we uphold the impugned order of the DRP on this aspect of the matter. As regards the second aspect of the issue relating to the change in the method of recognition of income adopted by the assessee company, In the present case, as a result of extra-ordinary events witnessed by the Satyam group of companies to which the assessee company belonged in the month of January, 2009, there was uncertainty with regard to the completion of project by the assessee company and delivery of units booked. Keeping in view this uncertainty, some of the agreement holders tendered applications for cancellation of the units booked and demanded refund of the advances paid. Some of the agreement holders also filed cases against the assessee company for cancellation the agreements and refund of the amounts paid by them. The ultimate collection from these agreement holders thus became uncertain and the assessee company, in our opinion, rightly decided to postpone the revenue recognition to the extent of such uncertainty, by adopting the new method of recognition of income on the basis of registration of agreements for sale or handing over of possession of the units, as the same enabled it to assess the ultimate collection with reasonable certainty. As such, considering all the facts of the case, we are of the view that the learned DRP was fully justified in directing the Assessing Officer to accept the change in the method of revenue recognition adopted by the assessee and consequential reversal of revenue on the basis of the cancellations/legal cases, and upholding its order giving relief to the assessee on this issue - Decided in favour of assesse. Disallowance of various expenses - bills produced by the assessee company in support of the said expenses were not in its name, but were in the name of other group companies - Held that:- we uphold the impugned order of the DRP directing the Assessing Officer to verify the relevant expenses and if it is found on such verification that the payments are made by the assessee company by cheque and the same expenses are not claimed by the other group companies, in whose names the relevant bills are issued, the same may be allowed as deduction in the case of the assesse - Decided against revenue. Disallowance under S.40(a)(ia) - default on the part of the assessee to deduct tax at the rate of 1% for the payments made to Maytas Infra P. Ltd., instead of 2% - Held that:- As decided in CIT V/s. S.K.Tekriwal [2012 (12) TMI 873 - CALCUTTA HIGH COURT] the provisions of S.40(a)(ia) are applicable for non-deduction of tax and not for short deduction of tax, and no disallowance under the said provision could be made in a case where there is only a short deduction of tax at source. Thus we uphold the impugned order of the learned DRP directing the Assessing Officer not to make disallowance on this issue under S.40(a)(ia). - Decided against revenue. Disallowance under S.40(a)(ia)- failure of the assessee to deduct tax at source from the payment of interest made to MIL ICD, as required under S.194C - held that:- As it is observed that a similar issue was involved in assessee’s own case for assessment year 2008-09 wherein Tribunal restored this matter to the file of the Assessing Officer with a direction to verify as to whether corresponding interest was duly offered to tax by MIL in its return of income and tax thereon was also duly paid. The Assessing Officer was directed by the Tribunal that if it is found on such verification that tax has already been paid by the payee, on the interest income, the disallowance under S.40(a)(ia) need not be made. As the learned DRP vide its impugned order has remitted this matter involved in assessment year 2009-10 to the file of the Assessing Officer for deciding the same as per the same directions as given by the Tribunal in assessee’s own case for assessment year 2008-09, we find no justifiable reason to interfere with the order of the DRP on this issue. - Decided against revenue.
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