Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2021 (2) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (2) TMI 1329 - AT - Income TaxDisallowance u/s 14A r.w.Rule 8D - assessee during the year under consideration had earned tax free interest income from various tax free bonds - HELD THAT:- We are of the considered view that no part of the interest expenditure could have been attributed to the earning of the exempt income by the assessee during the year in question. Our aforesaid view is fortified by the judgment of CIT Vs. HDFC Bank Ltd. [2014 (8) TMI 119 - BOMBAY HIGH COURT]. Accordingly, in terms of our aforesaid observations, we herein vacate the disallowance made by the A.O under Sec. 14A r.w Rule 8D(2)(ii). As regards the disallowance made by the A.O under Sec. 14A r.w. Rule 8D(2)(iii) we find substantial force in the claim of the ld. A.R that the investments which had not yielded any exempt income during the year under consideration were liable to be excluded for the purpose of computing the 'average value of investments‘ within the meaning of Rule 8D(2)(iii). Our aforesaid view is supported by the order of the ‘Special bench’ of the ITAT, Delhi in the case of Vireet Investments [2017 (6) TMI 1124 - ITAT DELHI]. As such, we herein restore the issue for the limited purpose of computing the disallowance under Sec.14A r.w Rule 8D(2)(iii) to the file of the A.O in terms of our aforesaid observations. The Ground of appeal No. 1 is partly allowed. Disallowing expenditure w.r.t travel, hotel and food expenses incurred by the assessee company treated as an unexplained expenditure - HELD THAT:- We have given a thoughtful consideration and are of the considered view that as the aforesaid expenses were incurred by an employee of the assessee company viz. Mr. George Joseph, sales manager, by purportedly using the credit cards of the assessee company, the same, thus, could not have been summarily discarded by the lower authorities. Although, we are not oblivious of the fact that the assessee could not substantiate that the expenses in question were incurred wholly and exclusively for the purpose of its business, but then, we also cannot shut our eyes to the fact that the documentary evidence produced by the assessee before the DRP were considered by the panel with a half hearted approach. On the one hand the panel had declined to admit the documents produced by the assessee as 'additional evidence‘, while for at the same time it had given general observations as regards the same. Be that as it may, in our considered view the matter in all fairness requires to be restored to the file of the A.O for fresh adjudication. Needless to say, the A.O shall in the course of the 'set aside‘ proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate its aforesaid claim on the basis of fresh documentary evidence. The Ground of appeal No 2 is allowed for statistical purposes. Deduction u/s 80IC - including only 75% of the income from scrap sales while quantifying its claim of deduction raised under Sec. 80IC - HELD THAT:- We are unable to persuade ourselves to subscribe to the view taken by the lower authorities, and thus, direct the A.O to include the entire amount of scrap sales in the eligible profits of the assessee for the purpose of quantifying its claim for deduction under Sec. 80IC of the Act. The Ground of appeal No. 3 is allowed. TP Adjustment - addition towards advertisement, marketing, sales promotion expenditure ( 'AMP expenses') for the reason, that by incurring the said expenses it had benefitted its Associated Enterprise - HELD THAT:- On a perusal of the order passed by the Tribunal while disposing off the assessee‘s appeal for A.Y. 2005-06 and A.Y. 2007-08 [2018 (5) TMI 1790 - ITAT MUMBAI], respectively, we find, that the Tribunal had struck down the TP adjustment that was made w.r.t AMP expenditure - we, thus, finding no reason to take a different view and adopting a consistent approach therein respectfully follow the same herein vacate the TP adjustment made by the A.O/TPO w.r.t the AMP expenditure. Deduction u/s 80IC w.r.t the foreign exchange gain on raw and packing material - HELD THAT:- We are of the considered view that the foreign exchange gain on raw and packing material credited by the assessee before us in its profits and loss account can safely be held to be eligible for deduction under Sec.80IC of the Act. Accordingly, we concur with the claim of the assessee that the foreign exchange gain on raw and packing material was duly eligible for deduction u/s 80IC of the Act. We, thus, direct the A.O to allow the asessee‘s claim for deduction u/s 80IC w.r.t the foreign exchange gain on raw and packing material - The Ground of appeal No. 2 is allowed in terms of our aforesaid observations. Adjustment to the income of the assessee w.r.t the provision of the research and development/testing services - Comparable selection - HELD THAT:- Exclude Alphageo (I) Ltd. from the final list of comparables as functionally not comparable. PCG Life Sciences ltd - On a perusal of the order of the TPO and that of the DRP, we find, that neither of the said authorities had given any cogent reason for including/upholding the inclusion of the aforementioned company as a comparable in the final list of the comparables for benchmarking the international transactions of the assessee before us. Admittedly, as is discernible from the financial statements of the aforementioned company, we find that it is inter alia engaged in the business of selling chemical compounds, which as observed by us hereinabove constitutes 1/3rd of its total turnover - no segmental information w.r.t the aforementioned company was available, the same, thus, could not have been adopted as a comparable for benchmarking the international transactions of the assessee for the year under consideration - we are of a strong conviction that the lower authorities had erred in including the aforesaid company as a comparable for benchmarking the international transactions of the assessee for the year under consideration. Clinsys Clinical Ltd - TPO/DRP had without giving any cogent reason excluded the aforesaid comparable of the assessee from the final list of comparables. We are unable to concur with such non-speaking observation of the lower authorities, and in all fairness and in the interest of justice restore the matter to the file of the A.O/TPO for deciding the aforesaid issue afresh. Fortis Clinical Research Limited -Admittedly, it is a matter of fact borne from the record that the TPO/DRP had not given any cogent reason for excluding the aforementioned company selected by the assessee as a comparable from the final list of comparables. In our considered view, the matter in all fairness requires to be revisited by the TPO, who is thus directed to re-adjudicate the same after affording a reasonable opportunity of being heard to the assessee.
|