2021 (7) TMI 853 - ITAT AHMEDABAD - Income Tax

Head Note / Extract:
Transfer Pricing - Addition by way of upward adjustment in respect of reimbursement expenses on the basis of order u/s. 92C(3) - HELD THAT:- The associated concern has also reflected such expenses in their books of account and shown as expenses reimbursed by the assessee company. All the details and material facts were disclosed before the lower authorities by the assessee company and submitted that no international transaction has taken place between the assessee company and its associated concern in respect of amount shown as reimbursement of expenses, therefore, no question of arms length price determination was arised in its case. As observed that CIT(A) has not categorically disproved the material facts and explanation of the assessee company in support of its contention that it has made only reimbursement of expenses to its associated concerned which were incurred for the purpose of business of the assessee company. CIT(A) has stated in a general manner that assessee has reimbursed expenses which were the responsibility of associated concern, therefore, the transaction was not at arms length. CIT(A) has not given specific reason in support of his decision and also not disproved the submission of the assessee pertaining to nature of reimbursement of expenses and the relevant material demonstrating that such expenses were not incurred for any benefit of the subsidiary company. No merit in the decision of the ld. CIT(A). Therefore, this ground of appeal of the assessee is allowed. Addition of prior period expenses - HELD THAT:- AO found that there was no such prior period income and the same was the amount on account of reversal on discount and sales promotion expenses claimed and allowed in the earlier years. On query, the assessee company vide letter dated 22nd Nov, 2010 admitted that the amount of ₹ 30,80,966/- was actually the liability for expenses claimed and allowed in the earlier years by way of discount and rate difference etc. and agreed for adding the same u/s. 41(1) - on verification of the material on record, the Assessing Officer has brought to the notice of the assessee that such amount on account of reversal of expenses claimed was ₹ 42,48,547/- . The assessee has agreed for the same for making addition to its total income vide order sheet entry dated 3rd Nov, 2010. In the light of the above facts and finding, we do not find any infirmity in the decision of ld. CIT(A) after considering the supporting material which demonstrate that assessee was agreed for the impugned addition on account of reversal of actual expenses earlier allowed which has nothing to do with prior period expenses. Addition by invoking provision u/s. 40(a)(i) - Short deduction of TDS - HELD THAT:- As in case of CIT vs. Prayas Engineering [2014 (11) TMI 1086 - GUJARAT HIGH COURT] on the issue of short deduction of tax deducted but not paid to credit of the Government wherein after making adjustment no disallowance was made u/s. 40(a)(ia). After considering the finding of the Hon’ble Jurisdictional High Court in the above referred case, we restore this issue to the file of Assessing Officer for adjudicating afresh after taking into consideration the observation of the Hon’ble High Court in the above referred case Deduction claimed u/s. 10B of the act as per revised form no. 56G - Addition by re-computing profits of 100% export oriented unit excluding miscellaneous income, export incentive income and interest - HELD THAT:- CIT(A) has dismissed the appeal of the assessee on this issue in a general manner stating that assessee has not specified how the earlier certificate issued by the chartered accountant was incorrect. The Hon’ble Jurisdictional High Court in the case of Mitesh Impax [2014 (4) TMI 484 - GUJARAT HIGH COURT] in this order has clearly held at para 38 to 41 of the order after distinguishing the judgment in the case of National Thermal Power Company Ltd. [1996 (12) TMI 7 - SUPREME COURT] and the decision in the case of Goetze India Pvt. Ltd. [2006 (3) TMI 75 - SUPREME COURT] that appellate commissioner or the Tribunal, the courts have recognized their jurisdiction to entertain a new ground or a legal contention. Claim cannot be shut out for all time to come merely because it is raised for the first time before the appellate authority without resorting to revising the return before the Assessing Officer. We direct the Assessing Officer to consider the claim of the assessee for claim of deduction of ₹ 7,37,91,346/- u/s. 10B as per the revised computation filed on form no. 56G after required verification. Once an income forms part of business of 100 per cent export oriented undertaking (EOU) of the assessee same cannot be excluded from eligible profit for purpose of computing deduction u/s. 10B of the Act. Since the revised claim of deduction u/s. 10B is required verification, therefore, we restore this issue raised in the ground of appeal no. 5 of the assessee to the file of the Assessing Officer for deciding de-novo as per the directions laid down in the above referred judicial pronouncements. Accordingly, this ground of appeal of the assessee also allowed for statistical purposes. Addition on account of additional depreciation - HELD THAT:- As decided in own case [2014 (10) TMI 1042 - ITAT AHMEDABAD] addition of machinery was after 31st of March 2005. Appellant was already in the business of manufacturing articles for things. The machine purchased is not covered by any clause of proviso to this section. The same was not used by any person before installation. It is not installed in office or residential premises. This is not office appliance or road transport vehicle. Further these machines are also not eligible for 100 percent depreciation in one year. Considering this appellant fulfils all the conditions required for claim of additional depreciation. Respectfully following the decisions of Madras High Court relied upon by the appellant, assessing officer is directed to allow additional depreciation on new plant and machinery purchased. Addition on account of product registration expenses less depreciation - HELD THAT:- As decided in own case [2014 (10) TMI 1042 - ITAT AHMEDABAD] in a situation when the genuineness of the expenditure was not doubted by the AO but only on a technical point the impugned disallowance was made we hereby hold that the issue being directly covered by the precedents as cited above in favour of the assessee; hence, this ground of the Revenue has no force, therefore, dismissed. Deduction u/s 10B of the act on exchange rate gain on revenue account - HELD THAT:- We do not find any reason to interfere in the finding of ld. CIT(A) and we consider that assessee is eligible for deduction u/s. 10B on foreign exchange fluctuation gain pertaining to revenue account. Therefore, this ground of appeal of the revenue is dismissed. Disallowance u/s 14A - HELD THAT:- It is undisputed fact that during the year under consideration the assessee has not earned any exempt income. In this regard, the Hon’ble Jurisdictional High Court in the case of CIT vs. Corrtech Energy Ltd.[2014 (3) TMI 856 - GUJARAT HIGH COURT] is held that in the absence of any claim for exempted income no disallowance u/s. 14A of income tax act r.w.s. 8D of IT. Rule 1962 can be made. Following the decision of Hon’ble Jurisdictional High Court as supra, we do not find any infirmity in the decision of ld. CIT(A).