Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2023 (4) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2023 (4) TMI 190 - AT - Income TaxLate payment of employees contribution of provident fund - CIT-A allowed claim of assessee - HELD THAT:- Now honourable Supreme Court has decided this issue in Checkmate services private limited [2022 (10) TMI 617 - SUPREME COURT] holding that non-deposit of employees contribution within the due date prescribed under the respective statute is disallowable u/s 36 (1) (BA) r.w.s. 2 (24) (x) of the act. Therefore decision of CIT – A is unsustainable in law - Decided in favour of revenue. Disallowance made on the director's salary and administrative facility - As per AO 50% of the director's office expenses should not be capitalized to the cost of project - claim of the assessee is that according to accounting standard – 2 it is not permissible and submitted those administrative costs, which are not related to bringing the inventory to the present location, cannot be included in the cost of the project - HELD THAT:- The identical issue decided in case of Hiranandani Palace Gardens private limited [2015 (12) TMI 1649 - ITAT MUMBAI] following the order of Lodha Plaza [2014 (12) TMI 1272 - ITAT MUMBAI] held that such costs are not included in the cost of work in progress. Identical issue arose in [2019 (4) TMI 259 - ITAT MUMBAI] wherein held that expenditure pertaining to employee cost, administrative expenses and selling and marketing expenses debited to the profit and loss account are to be allowed in the year in which those are incurred. Decided Against revenue. Disallowance u/s 14 A - necessity of recording satisfaction - HELD THAT:- In absence of satisfaction the learned assessing officer was not authorized to make the disallowance u/s 14 A - See case of Maxopp investment Ltd [2018 (3) TMI 805 - SUPREME COURT] Accordingly, additional ground fire by the assessee are allowed and AO is directed to delete the disallowance -Consequently, the addition to the book profit under section 115 JB of the act is also not sustain - Decided in favour of assessee. TP Adjustment - arm's-length price of the guarantee commission at the rate of 0.3523 percentage instead of 1.25% - HELD THAT:- The rate of guarantee commission is required to be determined on the basis of credit rating of the issuer company, comparison of interest rates without guarantee and with guarantee. The difference of the two is required to be shared between the issuer as well as the guarantor. The proper database for credit rating was used. The database for scanning of various deals was used. The tenor adjustments were also made. No reasons were shown for sharing of the interest saving not properly applied. As in some of the cases the honourable Bombay High Court has also applied guarantee commission rate at 0.20% i.e. Asian paints limited [2014 (1) TMI 16 - ITAT MUMBAI] and Everest Kanto cylinders limit Ltd [2015 (5) TMI 395 - BOMBAY HIGH COURT] In case of Reliance industries Ltd [2013 (9) TMI 567 - ITAT MUMBAI] the coordinate bench has adopted the guarantee commission rate at 0.38%. In view of this, we do not find any infirmity in the order of the learned CIT – A in holding that arm's-length price of the guarantee commission is 0.3523 percentage. Adjustment to the brokerage expenses - HELD THAT:- We find that the impugned transaction is sale of property to the non-resident Indians. The property is situated in India, the brokerage is paid for the sale of property to the non-resident. Mauritius AE as well as the uncontrolled independent parties in a different location does not make any difference. Even otherwise, the action of the learned TPO to adopt brokerage at the rate of only 1% as arm's-length price is also not supported by any data or transaction. For the purpose of transfer pricing, only transaction is to be compared with a transaction. There is no transaction at the rate of 1% used by the learned TPO for benchmarking the brokerage paid. The comparables shown by the assessee as internal cup cannot be found fault with. No reason to disturb the order of the CIT – A. TP Adjustment - 10% mark up on the reimbursement of expenses paid by Lodha developers UK Limited to the assessee company - HELD THAT:- These are the amount paid on behalf of Lodha developers UK Limited starting from 4 June 2015 2/29 of March 2016. As on 31st of March 2016, respective bills for prepared stating that these are reimbursement expenses paid on behalf of the UK entity. The fully agree with the orders of the learned lower authorities that no independent party would have kept on paying on behalf of somebody else and as on the last date of the accounting year, the bills raised for reimbursement. For the purpose of reimbursement of the expenditure, firstly the associated entity should have given an authority to the assessee to incur such expenditure on its behalf. In absence of that, it cannot be said that these are merely reimbursement of expenditure. The fully concur with the orders of the lower authorities. Decided against assessee. Appeal of Revenue and assessee are partly allowed.
|