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2015 (12) TMI 1170 - AT - Income TaxTransfer pricing adjustment - international transactions of provision of support services in respect of Clinical Study Management and Monitoring Support Services - Held that:- While deciding this issue, the DRP has not given detailed reasoning to arrive at its conclusion. The real issues raised by the assessee in detailed submissions filed before the DRP have not been dealt with properly. It appears that the DRP could not properly appreciate the facts of the case and issues involved therein. It has been pointed out by the Ld. Counsel that some incorrect facts have been noted by the DRP in its order. It has been mentioned by the DRP that the assessee had sole right to decide investigator, whereas as per Ld. Counsel, the correct facts are that the assessee company has right to only monitor the progress of the investigator. In its letter dated 14.07.2011, addressed to the DRP, the assessee has made detailed submissions and also contested the comparables considered by the TPO. It is noted from the order of the DRP that no findings have been given with regard to the objections made by the assessee with respect to selection of comparables by the TPO. No proper decision has been given by the DRP on the merits of the case also. Therefore, in our considered opinion, this ground needs to go back to the file of the DRP to re-adjudicate the same - Decided in favour of assessee for statistical purposes. Rental income from leased properties - AO taxing as as profit and gains of business or profession instead of income from house property - Held that:- As relying upon assessee's own case [2010 (6) TMI 433 - Bombay High Court ] held that Rental income received by the assessee-company from sub-leasing of commercial premises is to be considered as Income from house property even though the renting out of the premises amounts to commercial exploitation for business purposes by the assessee-company - Decided in favour of assessee TDS u/s 194C - disallowance u/s.40(a)(ia) - non deduction of TDS on payments made to manufactures towards purchase of finished goods - Held that:- The purchases have been made by the assessee from manufacturer/suppliers on principal to principal basis. The manufacturers/suppliers had also levied excise duty or sales tax or VAT, as was applicable. As per the terms of the agreement, title in these goods was transferred to the assessee at the time of delivery. It is further noted that the Central Board of Director Taxes had issued Circular No.681 dated 8th March 1984 providing that a contract undertaken to supply any article or goods according to the specifications given by any person and the property in such article or thing passes to such person only after such article or thing is delivered, then contract will be a contract for sale and as such outside of the proviso of section 194C. Thus, in view this circular as well as amendment brought out by Finance Act, 2009, in our view the impugned transactions were not liable for deduction of TDS u/s 194C.- Decided in favour of assessee Determination of Fair Market Value of Chandigarh property - reference to DVO - re computation of capital gains - Held that:- As in the case of Puja Prints (2014 (1) TMI 764 - BOMBAY HIGH COURT ), as per which the AO was empowered under the law to make a reference to DVO, if in his opinion the fair market value of the impugned property was more than the value as adopted by the assessee in the return of income on the basis of report of its registered valuer. The facts of the present case are clearly covered with the judgment of Hon’ble Jurisdictional High court, and therefore, respectfully following the same we hold that reference made by the DVO was bad in law and is held to be invalid and therefore, consequent to this, all further proceedings made by the AO in pursuance to such reference are also illegal, and therefore, the addition made by the AO on the basis of illegal reference and report of DVO is also illegal, and the same is hereby deleted. - Decided in favour of assessee Unexplained investment u/s 69 - Held that:- As gone through the material placed before us and the submissions made by the assessee. It is noted that no specific arguments were made, nor anything has been shown that this difference was duly reconciled.- Decided against assessee Interest u/s 234C levied - Held that:- The facts narrated by Ld. Counsel remain undisputed. The property was sold after 15th March of the F.Y., and thus, capital gain arose to assessee after time for payment of advance tax had passed. The assessee could not have, apparently forecasted the amount of income accrued to it by way of aforesaid capital gains. The legislature has taken care of this situation by inserting a proviso below section 234C(1)(b).There is no dispute on the fact that the exact estimate could not be done by the assessee on the amount of capital gains. The assessee has relied upon the judgment of Hon’ble Rajasthan High Court in the case of CIT vs. Smt. Premlata Jalani (2003 (7) TMI 62 - RAJASTHAN High Court ), wherein held interest is chargeable on delayed or deferred payment of advance tax, it shall be payable only with effect from the date the liability to pay advance tax in respect thereof has been incurred. There cannot be any interest prior to the date in respect of such liability when there was no liability to pay advance tax under any provisions of the Act. Interest has been levied ignoring the effect of aforesaid proviso as well as judgment therefore in the interest of justice, we send this issue back to the file of the AO to decide the same in terms of our directions as contained above - Decided in favour of assessee for statistical purposes. Interest income granted u/s 244A - Held that:- interest income u/s 244A has been done in such a manner that it has led to double taxation, as on date. We feel that the role of the income tax authorities, under the law, is to make fair assessment of income and determine tax payable thereon. No tax can be collected except with the authority of law, as per clear mandate of our Constitution, as enshrined in article 265. The law does not intend to make unjust enrichment of the Government, at the cost of taxpayers. Therefore, in the interest of justice and in all fairness, we direct the AO to look into all these aspects and ensure that impugned interest income is taxed only once, in appropriate year. For this purpose, necessary rectification orders shall be passed, as per law. The assessee shall extend requisite cooperation to the AO by providing required details, information and documentary evidences. Thus, Ground is sent back to file of the AO, with our directions as contained above.- Decided in favour of assessee for statistical purposes. Addition under section 145A to the closing stock on account of unutilized modvat credit - Held that:- as the fairness demands and as per law, the value of closing stock of a particular year should be the opening stock of the next year. There can be no doubt or debate on this proposition. If this principal is not followed, it may give rise to absurd results, leading to excessive and unfair assessment of income in the hands of the assessee. Therefore, we direct the AO to adopt the value of closing stock of A.Y. 2006-07 as value of opening stock of assessment year 2007-08, in case the addition made by the AO in the closing stock of A.Y.2006-07 has attained finality. Accordingly, this ground is sent back to the file of the AO with the directions as given above - Decided in favour of assessee for statistical purposes. Deduction u/s 35DD - assessee has sought direction to be issued for granting 1/5th of the expenses amounting to ₹ 13,06,200/- related to merger of Pharmacia Healthcare Limited with Pfizer Limited, as per the provisions of section 35DD - Held that:- As per law deduction has to be allowed equivalent to the amount of 1/5th of the total expenditure u/s 35DD as has already been allowed to the assessee in A.Y. 2004-05. We direct the AO to maintain consistency, and follow the order for A.Y. 2004-05. - Decided in favour of assessee Adjustment to Arms Length Price on account of interest on outstanding receivable - Held that:- This issue has been thrashed out by the Hon’ble Pune Bench in the case of iGATE Computer System Ltd. (supra), wherein it has been held that once the transaction between the assessee and its AEs was in foreign currency, then the same partakes the nature of international transaction and the said transaction has to be looked upon by applying the commercial principles with regard to an international transaction. If that is so, then the domestic lending rates cannot be applied in order to benchmark the transaction of the assessee with its AEs and the international rates fixed by LIBOR would come into place. As no serious objections have been raised by the Ld. CIT-DR for adoption of international rates fixed by LIBOR, keeping in view the fact that amount was to be received back in US currency only. Thus, we hold that Indian prime lending rates cannot be applied and the international rate fixed by the LIBOR would come into play. In our considered view, as per as per the suggestions received from both the sides, the rate of interest should be LIBOR plus 150 basis points. Period up to which adjustment on account of interest can be made to the income to the current year - Held that:- This issue has been very well explained by the Mumbai Bench of ITAT in case of Tecnimont ICB House (2015 (7) TMI 602 - ITAT MUMBAI), wherein it has been held that interest should be charged only up till the end of the F.Y. Thus, it is held that interest should be calculated from the due date till the date of realisation, if the outstanding amount has been received during the year. In case the outstanding amount has been received back after 31st March 2008, then interest will be calculated from the due date till the last date of this F.Y. i.e. 31st March 2008. We direct the AO to give effect to our directions, accordingly. Thus, Ground no.2 is partly allowed as in terms of our directions as stated above. Disallowance u/s 40(a)(ia) - non deduction of TDS on payment towards clinical trial expenditure - Held that:- As per the order passed by Ld. CIT(A), it has been held, in principle, that out of clinical trial expenses amounting to ₹ 3.56 crores, TDS was not required to be deducted. Keeping in view nature of these expenses, and for the purposes of requisite verification of facts as was claimed by the assessee, the matter was sent back to the file of AO. Thereafter the AO passed an order giving effect dated 31st December 2014. We, therefore, send this ground back to the file of the AO to examine these facts that out of total disallowance of ₹ 3.56 crores, how much amount has been deleted by the AO in the order dated 31.12.2014. The disallowance shall be deleted equivalent to this amount and balance amount of disallowance shall be sustained. Thus, assessee gets part relief - Decided in favour of assessee for statistical purposes. Profit on sale of right to use the trademark/license pertaining to consumer health brands - short term capital gains OR long term capital gains - Held that:- real substance of the transactions is that the assessee company was rightful and legal owner of these assets since 1st December 2001 and has been holding these assets in the capacity of defacto as well as dejure owner. These are clearly long term assets under the income tax law, having been held for more than 36 months by the assessee. Therefore, in view of these facts and circumstances of the case, it is held that the capital gain arising on the transfer of these assets is long term capital gain. Thus, the AO is directed to recompute the income of the assessee - Decided in favour of assessee Addition made by the AO on account of mismatch of individual transaction statement transactions with insurance companies - Held that:- The primary onus is upon shoulders of the AO to show that the transactions reported in AIR belong to the assessee. It is only thereafter, the onus of the assessee shall start to show that these transactions have been duly recorded in the books of account of the assessee, failing which the addition may be liable to be made. With these directions, this issue is sent back to the file of the AO with further directions to grant adequate opportunity of hearing to the assessee. The assessee shall also extend requisite cooperation to the AO. - Decided in favour of assessee for statistical purposes. Addition on account of some differences on the basis of AIR information and on account of mismatch with From 26 - Held that:- Our prima facie view is that the addition has been made and sustained by the lower authorities by following a casual and irresponsible approach. The assesse has submitted complete information showing proper reconciliation. These have been either ignored or not properly appreciated by the lower authorities. Both of these grounds are sent back to the file of the AO with our directions as have been given while disposing Ground no. 7 above. - Decided in favour of assessee for statistical purposes. Credit of tax deducted at source - Held that:- It is noted that DRP has already given direction to the AO to verify the claim, and accordingly grant credit of tax debited at source by HSBC. We reinforce direction given by the DRP and direct the AO to grant credit for TDS after making requisite verification, as per law. - Decided in favour of assessee for statistical purposes.
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