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2016 (5) TMI 265 - AT - Income TaxDisallowance of interest - Held that:- The issue had been decided in favour of the assessee by his predecessor in the immediately preceding year, that the appeals filed by the Department against the order of his predecessor for the AY. s. 2000-01 and 2001- 02 had been dismissed by the Tribunal , that there was no change in facts during the year as compared to the facts in the earlier years. Therefore, he directed the AO to delete the disallowance of interest relatable to CWIP. Addition on account of unutilised modvat credit - Held that:- The Tribunal in the assessee’s own case for the AY. 2002-03 had restored the matter to the file of the AO for giving effect to the provisions of section 145A in entirety and not restricting its operation to the value of closing stock alone, that in the set aside matter, the AO did not grant any relief, that the FAA granted relief to the assessee holding that no addition was required if one strictly followed the provisions of section 145 A of the Act, that the AO filed an appeal before the Tribunal challenging the order of the FAA, that the Tribunal vide its order dismissed the appeal, filed by the AO. Considering the above, issue restored back to the file of the AO for fresh adjudication. He is directed to decide the issue as per the directions given in the order for the AY. 2003-04 Exclusion of 90% of the certain business receipts from the profit of the business for the purpose of computing deduction u/s. 80 HHC - Held that:- Exclusion of insurance claim is confirmed as relying on case of Pfizer Limited [2010 (6) TMI 433 - Bombay High Court ] as held the insurance claim on account of the stock-in-trade did not constitute an independent income or a receipt of a nature similar to brokerage, commission, interest, rent or charges. Hence, such a receipt would not be subject to a deduction of ninety per cent. It is found that issue of sales tax refund and sales tax set off has been decided in favour of the assessee by the Hon’ble Apex Court in the case of Alfa Lavel (India) Ltd. (2007 (11) TMI 281 - SUPREME Court ). We find that the issue of registration charges written back was decided in favour of the assessee by the Tribunal while deciding the case of Extrusion Process Private Ltd. (2006 (6) TMI 261 - ITAT MUMBAI ). As far as exclusion of sale of scrap is concerned it is found that in the case of Sony India Pvt. Ltd. (2008 (9) TMI 420 - ITAT DELHI-H ) to hold the said income comprising of sale of scrap, amounts written back and sale proceeds of spare parts was directly related to the dominant business of the taxpayer company and the same, therefore, represented its operational income which was entitled for inclusion in the profits of the business for the purpose of computing deduction under s. 80HHC - Decided against revenue Benefit of deduction under section 80 HHC denied - Held that:- In the absence of any profit available to the assessee from exports, the benefit of deduction under section80 HHC was rightly not available. In our considered opinion the ld CIT(A)was justified in rejecting the ground of the assessee on the claim of deduction under section 80HHC in the absence of any eligible profit - Decided against assessee Disallowance invoking the provisions of section 40A(2)(b) - Held that:- We find that the assessee had produced a reliable evidence in form of a certificate issued by TC, that the AO did not discuss anything about it and made the disallowance. In our opinion, the order of the FAA does not suffer from any legal or factual infirmity. He had decided the issue after considering the certificate that was relevant to decide the issue. Therefore upholding his order, we decide ground against the AO Adjustment u/s. 92CA - addition on account of sale of goods to AE - transaction on the basis of TNMM or Comparable Uncontrolled Price(CUP)method - FAA deleted the addition proposed/made by the TPO/AO - Held that:- The assessee wanted to sell Diacamba in USA, that from the local registration prospective it was essential to have a USA entity, that it set up GUSA which could carry out registration marketing and distributing functions, that it had applied the TNMM four determining the ALP of the transactions, that G-USA dealt only in the products of the assessee and had no other business activity, that any profit/loss occurring to the AE was on account of the products purchased from the assessee, that the AE had incurred a net loss of 10. 98% on sales, that 74% of the sale was made to G-USA, that there was no evidence of shifting of profit by the assessee to its AE, that it had charged USD 14. 11 per Kg. from its AE for the goods supplied, that the average sale price to non-AEs of USD 14. 64 per Kg. resulted in adjusted APL of USD13. 99 per Kg. In our, opinion there is no legal or factual infirmity in the order of the FAA. Therefore, confirming the same we decide ground against the AO. Deduction u/s. 80 HHC - Held that:- 90% of the receipts of the assessee under the three heads i. e. consultancy services,sundry creditors balances written back and sundry income should not be excluded from the profit of the business for the purpose of computing deduction u/s. 80 HHC of the Act. Reduction of profits eligible for deduction u/s. 80HHC for the purpose of calculating book profits u/s. 115JB - Held that:- Identical issue has been decided in favour of the assessee by the Tribunal , while adjudicating the appeal for the AY. 2003-04 to hold that deduction claimed u/s. 80HHC had to be worked out on the basis of adjusted book profit u/s. 115JA and not on the basis of profits computed under regular provisions of law applicable to computation of profits and gains of business. Deemed dividend addition u/s 2(22)(e) - Held that:- Commercial transactions between two companies could not be brought within the purview of the provisions of section 2(22)(e) - Decided in favour of assessee Addition u/s. 92 CA (3) - Held that:- Australian-AE was set up to obtain and hold registration rights of certain products in Australia as was required to enable the assessee to make sale of its products in Australia, that the Australian-AE would pay usage rights received from the assessee to MA-AUS, after keeping some portion, that the TPO did not consider the basic fact that the assessee made direct sales to third parties and the resultant profit was accounted for directly in its books of accounts, that the expenses pertaining to making those sales had to be booked in its P&L a/c. , that the role of the Australian-AE was limited, that AE did not have any other business. - Decided in favour of assessee TP adjustment on depreciation of registration rights - Held that:- The wholly owned subsidy of the assessee held registration rights in two products, that it had paid registration charges for selling those products in the US markets, that it had also paid other fees as required by the US laws, that it had incurred total expenditure of USD 1, 58, 79, 306 under the head registration charges, that the AE got the assets revalued as on 01. 01. 2204, that registration rights were revalued from ₹ 44. 29 crores to ₹ 67. 99 crores by the independent valuer, that on 30. 09. 2004 the AE was dissolved, that the assessee took over the assets and liabilities of the AE at the revalued price, that the payment for registration rights and other fees were paid much before the revaluation, that it adopted lesser value of the rights as compared to the value determined by the valuer, that further clarification were called from the valuer, that in the remand report the TPO agreed that payment was made by the AE for the rights in earlier years, that there was no discrepancy in the method of valuation, that the TPO pointed out element of non transferability in the valuation report for supporting the adjustment, that the FAA has given a categorical finding of fact that the TPO was factually incorrect in arriving at the conclusion of non transferability, that the AE had right to transfer the rights to others also. Considering the above facts, we are of the opinion, that the order of the FAA does not suffer from any legal or factual infirmity. Therefore, confirming his order, we decide ground against the AO. - Decided in favour of assessee Non-adjudication of the ground relating to computation/re-computation of capital loss on liquidation of investment held by the assessee in G-USA- Held that:- FAA should have decided the issue raised by the assessee. The TP adjustments do not deal with computation/ re-computation of capital loss. Such computation will have its own consequences. The assessee had specifically mentioned that loss would have to be computed at ₹ 23. 06 crore as against ₹ 18. 2 to crores. As the FAA has not adjudicated the issue, so, in the interest of Justice, we are restoring back the issue to the file of the FAA for fresh adjudication. He is directed to afford a reasonable opportunity of hearing to the assessee. First ground of appeal is decided in favour of the assessee, in part. Disallowance of additional deduction u/s. 35(2AB)(1) in respect of the expenditure of ₹ 15. 57 crores incurred on in-house research and development activity carried out its Dombivili R&D facility - Held that:- As the AO/FAA did not have benefit of the certificate issued by the Board at the time of assessment/deciding the appeal. So, following the above order of the Tribunal, matter is restored back to the file of the FAA to decide the issue afresh.
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