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2016 (7) TMI 1012 - AT - Income TaxTransfer pricing adjustment u/s 92CA - the assesseecompany raised the jurisdiction issue for invoking the provisions of chapter X of the Act - existence of relationship of AE between assessee-company and JII - Held that:- The definition of the term ‘AE’ is divided into two subsections (1) and (2). Sub-sec.(1) contains(means) definition of AE is .para meters of management control or capital of that enterprise. Sub-sec.(2) contains a deeming provision and also enumerates circumstances when the enterprise can be deemed to be AE. The opening words of sub-sec.(2) are amended by Finance Act, 2002 w.e.f. 1/4/2002 . The resultant of the amendment is thus explained that unless the requirements of sub-sec.(2) are fulfilled, the sub- section (1) cannot be applied at all. This implies that in order to constitute relationship of an AE, the parameters laid down in both subsections (1) and (2) should be fulfilled. If we were to hold that there is a relationship of AE, once the requirements of sub-sec.(2) are fulfilled, then the provisions of sub-sec.(1) renders otiose or superfluous. Now, it is well settled canon interpretation of statutes that while interpreting the taxing statute, construction shall not be adopted which renders particular provision otiose. When interpreting a provision in a taxing statute, a construction, which would preserve the purpose of the provision, must be adopted. If more than one construction is possible, that which preserves its workability and efficacy is to be preferred to the one which would render it otiose or sterile. In that view of the matter, courts should not adopt construction which would upset or even impair the purpose in introducing a particular provision in the statute. Therefore, following this principle, we hold that it is since the parameters laid down in sub-section (1) are not fulfilled, there is no relationship of AE between assessee-company and JII and therefore, the provisions of chapter X of the Act have no application. In the result, the transfer pricing adjustment made by the TPO is not valid in law. - Decided in favour of assessee. Addition u/s 14A - Held that:- Now, law is fairly settled that no disallowance under clause (iii) of sub-rule (2) of rule 8D can be made without rendering a finding as to how the claim of the assessee that no expenditure was incurred, is incorrect. When the assessee had not incurred any expenditure, the question of disallowance u/s 14A does not arise as per law laid down by the Hon’ble Karnataka High Court in the case of Canara Bank Vs. Asst.CIT (2014 (1) TMI 1586 - KARNATAKA HIGH COURT ) In the circumstances, we remit the matter back to the file of the AO for de novo assessment on this issue as per law - Decided in favour of assessee by way of remand. Disallowance of deduction u/s 80JJAA - Held that:- This ground is covered in favour of the assessee-company in its own case for assessment years 2007-08 and 2008-09 . Respectfully following the order of the Tribunal, we remit the issue back to the file of the AO for de novo examination of the claim in accordance with provisions of law.- Decided in favour of assessee by way of remand.
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