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Showing 1 to 20 of 1662 Records
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2016 (9) TMI 1668 - ALLAHABAD HIGH COURT
Addition u/s 115(BBC) r/w Section 68 - anonymous donation - HELD THAT:- Questions No. 1 and 2 does not arise since Section 115 (BBC) itself was inserted in the Income Tax Act, 1961 w.e.f. 01.04.2007 and assessment year in question is 2005-06.
Addition U/s. 69 on account of unexplained investment in property - addition was made on the basis of cogent documentary evidences found during the course of survey proceedings - ITAT deleted addition - As could not be disputed that same are covered by Supreme Court's judgment in Sargam Cinema[2009 (10) TMI 569 - SC ORDER] wherein similar question has been answered in favour of Assessee. Hence, Questions also answered against Revenue and in favour of Assessee.
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2016 (9) TMI 1667 - SUPREME COURT
Dismissal of the writ petition and the application for clarification - declination to interfere with the decision taken by the Respondents to treat the bid submitted by the Appellants as non-compliant with the conditions of Invitation for Bids (IFB) - HELD THAT:- The Appellant No. 1 had not filed an application for grant of registration. It was Appellant No. 2 who had filed it. Be that as it may, the decision dated 31.03.2015 was taken by the Registration Committee of CIB to approve the registration subject to the condition DAC granting permission for commercialization. That apart, the decision taken by the concerned authority, even if it is put on the website, despite the astute submission of Mr. Singh, would not tantamount to grant of registration certificate. The amendment was made, as we perceive, to clarify the position.
The use of the word "must" adds a great degree of certainty to the same; it is a requisite parameter as thought of by the Respondent No. 1. The tender was floated for purchase which is needed for the nation. The first Respondent along with Respondent Nos. 2 and 3 were taking immense precaution. In such a circumstance, needless to emphasize, public interest is involved. It cannot succumb to private interest. The action on the part of the Respondent Nos. 1 to 3 cannot be regarded as arbitrary or unreasonable. By no stretch of imagination it can be construed to be an act which is not bonafide or to have been done to favour the fourth Respondent. Nothing has been pleaded that the fourth Respondent is not eligible or qualified.
The essential condition of tender being not met with, the tenderer, the Appellants herein, were ineligible and the tender was non-responsive. That apart, the amendment was applicable to all. Additionally, the High Court in the first round of litigation had not held that the registration certificate granted on 31.03.2015 would enure to the benefit of the writ Petitioners from the date of the decision of the registration authority, and it had rightly not said so.
There are no substance in the grounds raised in this appeal - appeal dismissed.
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2016 (9) TMI 1666 - BOMBAY HIGH COURT
Attachment of property - monies were transferred, siphoned off, fraudulent documents were prepared and liabilities were transferred - HELD THAT:- Perusal of Order 21 Rule 58 clearly reveals that legislature in its wisdom has ensured that if a claim is made by third party, claiming to be the owner of the property which is attached, he can, instead of filing separate suit, file his objection under Order 21 Rule 58 and such an objection has to be considered by the Court. It will be necessary here to point out that sufficient power has been given to the Executing Court to decide the application and it has been clearly mentioned in the proviso to Rule 58(1) of order 21 that no such claim or objection shall be entertained - (a) where, before the claim is preferred or objection is made, the property attached has already been sold; or (b) where the Court considers that the claim or objection was designedly or unnecessarily delayed. Therefore, the Executing Court has power to regulate the procedure before deciding the claims or objections which are filed by the third parties. Keeping that in mind, the learned Single Judge has made those observations in para 4 of the said order.
The application for issuance of precept under section 46 is taken out firstly in cases where the property is situated outside the jurisdiction of the Court and, secondly, if the property which is to be attached is a movable property then order of attachment is passed, so that the execution does not become infructuous. The learned Single Judge therefore, in our view, has correctly followed the procedure laid down under CPC. It is therefore clarified that if such a remedy is available to the Appellant under Order 21 Rule 58, Appellant can also exhaust that remedy and the learned Judge before whom such an application is made shall accordingly decide it in accordance with law.
Appeal dismissed.
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2016 (9) TMI 1665 - KARNATAKA HIGH COURT
Speed money Payments - Disallowance of wages - cash payment to gang leaders - allowable business expenditure or not? - Tribunal restricting addition to 1.6% in respect of an expenditure which is of such nature as covered by section 37(1) - HELD THAT:- Tribunal while deciding the appeal, has casually proceeded to sustain the order passed by the AO - None of the major points decided by the Appellate Commissioner are answered by the Tribunal while setting aside the order passed by the Appellate Commissioner. Though the order passed by the Tribunal runs to number of pages, the crux of the matter is not adverted to by the Tribunal while arriving at the conclusion.
On careful perusal of the order passed by the Tribunal, we are of the opinion that the order of the Tribunal cannot be sustained inasmuch as the Tribunal has not applied its mind judiciously to the facts and circumstances of the case. In view of the same, interest of justice requires that the matter has to be re-dealt by the Income Tax Appellate Tribunal, Bangalore. By the said process, no prejudice would be caused to either of the parties.
Accordingly order passed by the Income Tax Appellate Tribunal, stands set aside. The matter restored to the file of the Income Tax Appellate Tribunal, Bangalore Bench 'A' for fresh disposal in accordance with law.
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2016 (9) TMI 1664 - ITAT INDORE
Addition on account of investment in shares made u/s 14A read with rule 8D - as DR contended that the assessee had diverted interest bearing fund for non-business purposes, therefore, the Assessing Officer was justified in invoking the provisions of Section 14A - HELD THAT:- We find that in the assessee’s own case for the assessment year 2008-09 the matter travelled to the Tribunal and the Tribunal after elaborately discussing the issue [2013 (9) TMI 1300 - ITAT INDORE] as held assessee has made investment in shares of group companies as a matter of commercial expediency. We also found that the assessee was having huge reserve as well as surplus funds available out of its profit. However, to show that investment in shares of Associate concerns have been made out of non interest bearing funds, is on the assessee and burden lies on him to demonstrate before the Departmental Authorities that no interest bearing fund has been used.
It is also a matter of record that since investment has been made under commercial necessities, the proposition laid down in the case of S. A. Builders Limited [2006 (12) TMI 82 - SUPREME COURT] is required to be considered before disallowing interest expenditure having been incurred on the funds borrowed for the purpose of business - investment in group companies were having taxable income and assessee has offered substantial long term and short term capital gains in the returns of subsequent years.
Thus we direct the AO to decide the matter afresh in terms of the above observations of the Tribunal. We direct accordingly.
Addition of prior period expenses - assessee company has claimed prior period expenses related to reversal of monthly toll charges under settlement with SPV Company Path Oriental Highways Ltd and income has been offered in respective year whereas there is no income received to the assessee - HELD THAT:- Tribunal in its order in the assessee’s own case for the assessment year 2008-09 [2013 (9) TMI 1300 - ITAT INDORE] has restored this issue to the file of the Assessing Officer as held As per the accounting standard, in case of construction contractor, the contract revenue would accrue or arise only in respect of initial amount of revenue agreed in the contract. However, in respect of variations of claim and incentive, the revenue would accrue and arise only in the situation, when there is not only probability of acceptance of claim but also when variations, claim or inventive are reliably measurable. Both the conditions enjoyed in respect of variations, claim or incentive payment are cumulative and unless both the conditions are met out together, no revenue claim or incentive can be recognized in the books of account. In the instant case, the claim of the assessee company has been rejected by POHL at thrash hold only and even the process of negotiations have not got commenced during the year under consideration.
As the alleged amount of proforma invoice has neither been received nor accrued to the assessee during the relevant assessment year under consideration. Therefore, there is no justification in the action of CIT(A) for bringing to tax net such amount during the year under consideration. However, the Department is at liberty to tax such income in the year of actual receipt, in any subsequent year. Accordingly, we restore the matter back to the file of Assessing Officer to verify and tax this income in the year of actual receipt.
Thus Assessing Officer is directed to verify the claim of prior period expenses and decide the same as per the above judgment of the Tribunal. Therefore, we restore this issue as per the above direction.
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2016 (9) TMI 1663 - PUNJAB AND HARYANA HIGH COURT
Seeking enhancement of compensation in regard to injuries sustained by him in a motor vehicular accident - HELD THAT:- Indisputably, the claimant did not examine any doctor from Artemis Hospital, Gurgaon to prove nature of injuries sustained, treatment given in regard thereto and the period of treatment. Counsel for the appellant is not in a position to say something as to for how many days, the injured/victim remained confined to the hospital or away from his workplace (Haryana Police). The mere fact that the appellant examined an official from Artemis Hospital, Gurgaon to prove bills Ex.P4 to P28 is not at all sufficient to accept the contention that he is entitled to enhancement of compensation or compensation awarded by the Tribunal is not just and equitable.
In absence of justification to grant compensation under other heads, submissions made by counsel for the appellant cannot be accepted only in view of value of the bills exhibited on record.
Appeal dismissed.
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2016 (9) TMI 1662 - ITAT CHENNAI
Nature of income - Agricultural income treated as income from other sources - HELD THAT:- Nothing to establish that the assessee does not have agriculture income for the relevant assessment year. The strong belief of Revenue authorities is that during the relevant assessment year the assessee could not have earned any agricultural income which appears to be quite illogical.
Since the facts pertaining to the relevant assessment year 2000-01 is more than 15 years old it would be difficult to make any estimate of agricultural income for the relevant assessment year at this relevant point of time - No option but to allow the claim of the assessee. Hence, we hereby direct the AO to delete the addition made under the head ‘income from other source’ and accept the same as “agricultural income” of the assessee. Decided in favour of the assessee.
Accrued interest income from bank deposits - As per AO even though the fixed deposits were frozen, interest was accruing to the assessee on those deposits and therefore, it will be liable to be taxed - HELD THAT:- There is a great element of uncertainty for realizing the interest as well as the bank deposits by the assessee. Even if she realizes the same, it would be after a period of number of years and probably at that time re-assessment may not be possible due to limitation and thus the assessee would not be able to claim refund of the tax paid if the deposits are forfeited.
As interest income of the assessee can be recognized only when there is no uncertainty and a significant scope to receive the same. Therefore, accrued interest on the bank deposit frozen by the DVAC, wing of the Govt. of Tamilnadu cannot be treated as interest income of the assessee during the relevant assessment year - direct AO to delete the interest income while computing the total taxable income of the assessee.
Revision u/s 263 - wealth tax assessment - Commissioner invoked his powers u/s 25 of the Wealth Tax Act by stating that the wealth tax assessment is found to be erroneous insofar as it is prejudicial to the interests of the Revenue - HELD THAT:- What can be the subject matter of reassessment can be done only by reopening of the assessment and not by revision u/s.263. This is because there is no assessment regarding the item considered in the DVAC report. When there is no assessment itself, the question of revision u/s.263 does not arise on this issue. In the present case if there is escapement of assessment on this issue and it should have been brought to assessment by virtue of sec.147 and 148 of the Act and not under section 263 of the I.T. Act and the revisionary power u/s.263 cannot be exercised for escapement of income. See Bidar Sahakar Sakkare Karkhane Ltd. Vs. State of Karnataka [1984 (7) TMI 341 - KARNATAKA HIGH COURT]
Addition for cost of construction - This has already been a subject matter of appeal before the CIT(A) for earlier assessment year and he has already adjudicated the issue and hence there is no question of further considering this issue - Now this is also supported by our order wherein we have confirmed the order of the ClT(A). On this ground also addition is unwarranted towards cost of construction.
Addition towards jewellery vehicles and other assets and footwear and silk sarees - Additions cannot be made entirely in the hands of the assessee since there premises where these were found were shared by three and other persons and it is not possible to say to whom these assets exactly belong. Since there is no categorical evidence to believe that this could be treated as belonging only to this assessee and it is too early to come to the conclusion that these belong to the assessee and fasten the liability of payment of tax. The charge sheet alone can not be treated as conclusive evidence to make additions.
Thus we annul the order of the CIT passed u/s. 263 and appeal of the assessee is accordingly allowed.
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2016 (9) TMI 1661 - ITAT CHENNAI
TP adjustment - upward adjustment on account of Corporate and Bank Guarantee charges - HELD THAT:- Following the decision of Bharti Airtel Ltd. [2014 (3) TMI 495 - ITAT DELHI] it held that since there is no cost involved in accepting the Corporate guarantee, it will not constitute an international transaction. The DRP directed the AO/TPO to follow the above decision of the Tribunal for this assessment year also.
Downward adjustment in respect of trademark, license fee paid by the assessee to that singapore company - DRP have given direction in deleting the additions made by way of ALP adjustment made in the case of Trademark/license Fees and Corporate/Bank Guarantee stands at ‘Nil’ to the TPO by following the Chennai Tribunal’s decision in assessee's own case for assessment year 2009-10 [2014 (10) TMI 669 - ITAT CHENNAI] - HELD THAT:- It is not the case of the Ld. DR that the impugned tribunal decisions are stayed by the Hon’ble High Court. Since the DRP has followed the decisions of Tribunal [2015 (8) TMI 40 - ITAT CHENNAI] for assessment year 2009-10 in assessee's own case, we do not find any infirmity in the order of the DRP on the above issues and accordingly, the grounds raised by Revenue are dismissed.
Disallowance u/s.14A r.w Rule-8D - assessee contended that since no exempt income is earned , disallowance u/s.14A would not arise - HELD THAT:- The assessee has not taken the plea that the impugned investment is made in its subsidiary and hence it would not fall under section 14A r. w rule 8D , as per the ratio reported in EIH Associated Hotels Ltd. [2013 (9) TMI 604 - ITAT CHENNAI] before the lower authorities. Thus, the factual matrix stand unverified. In the facts and circumstances, this issue is remitted back to the AO for due verification and application.
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2016 (9) TMI 1660 - ITAT KOLKATA
Bogus debtors - as per AO assessee must have collected the amounts due from the concerned debtors outside the books of account - HELD THAT:- As the said amount must have been collected by the assessee from the concerned party outside the books of account is taken to be true, such collection from debtors outside the books of account could not give rise to any income chargeable to tax in the hands of the assessee.
Assessee has also submitted that the amount received from the concerned debtors at the fag end of the year under consideration, was duly accounted for by the assessee in the books of account of the next year. Addition made by the AO and confirmed by the ld. CIT(Appeals) on account of alleged bogus sundry debtors is not sustainable - Decided in favour of assessee.
Disallowance u/s 40(a)(ia) - payments of bus hire charges made by the assessee to five bus owners without deduction of tax at source - HELD THAT:- We restore the issue relating to the disallowance u/s 40(a)(ia) on account of payment of bus hire charges to the file of the AO for deciding the same afresh in the light of the decision of the Tribunal in the case of Abhoy Charan Bakshi [2016 (5) TMI 755 - ITAT KOLKATA] after verifying the claim of the assessee that the concerned recipients of the bus hire charges have already offered to tax the entire amount in question in their returns of income - Assessee ground allowed for statistical purposes.
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2016 (9) TMI 1659 - SC ORDER
Deduction u/s 80P - interest received from employees who are not the members of the assessee-Society - As decided by HC [2016 (5) TMI 1153 - PUNJAB AND HARYANA HIGH COURT] even the interest earned from employees cannot be said to be core activity of the society and, therefore, in our opinion, interest earned from employees is not eligible for deduction u/s 80P(2)(a)(i) - HELD THAT:- Leave granted.
Parties shall complete pleadings within eight weeks. No stay.
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2016 (9) TMI 1658 - ITAT CHENNAI
TP Adjustment - computing the operating income under TNMM - excluding the Export incentive received and Foreign Exchange gain - HELD THAT:- As for the case of Goodyear India Ltd [2012 (12) TMI 1166 - ITAT DELHI] relied on by the AO, the issue was whether export incentive and rebate could be reduced from cost of goods. What was held was that such incentives were available to an assessee only after the exports were made and therefore, could not go to reduce the cost of goods.
On the other hand, in the cases relied on by the assessee, it has been uniformly held that such incentives were to be considered as part of operational income under TNM method while working out the margin of an assessee for comparability.
As for exchange gains, there is no case for the Revenue that it was earned through any hedging or speculative activity. It is not disputed that such gains were on account of transactions related to the exports. Hence, such gains, has to be considered as operational in nature.
We set aside the orders of the authorities below on this issue and direct the AO/TPO to rework the results of the assessee after considering the above terms as operational in nature. Needless to say same treatment shall be followed while working out the average PLI of the comparables as well.
Comparable selection - M/s Venus Garments Ltd (‘ VGL’) was a manufacturer exporter and not a trader exporter, according to the ld. AR, said company was functionally dissimilar to the assessee. also had related party transactions exceeding 25% - HELD THAT:- Lower authorities had still considered it to be a good comparable on a premise that both were in same line of business and exact product profile similarity was not a cardinal requirement. It is true that in a TNM method matching of exact product profile is not essential. In fact, this is rarely possible. However, the question here is not matching of profile as such. There is a cardinal difference in method of procurement of the garments for sale. Nature of expenditure and business environment of a manufacturer is different from that of a trader. A garment trader cannot be considered as functionally similar to a garment manufacturer. Hence, in our opinion, M/s VGL had to be excluded from the list of comparables.
AO/TPO is directed to rework the Arm’s Length Price of the international transactions based on our direction in paras supra.
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2016 (9) TMI 1657 - DELHI HIGH COURT
Validity of assessment u/s 153A/ 153C - subsequent search and seizure operations - HELD THAT:- As in these proceedings in view of the subsequent search and seizure operations, issuance of notice under Section 153A/153C for the assessment years in question stands abated. The revenue relies on the recent decision of V.L.S. Finance Limited [2016 (4) TMI 1133 - SUPREME COURT]. This position is not disputed by the counsel for the petitioner. WP dismissed as infructuous.
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2016 (9) TMI 1656 - ITAT CHENNAI
Disallowance of depreciation - AO treated the business income of the assessee to be income from undisclosed source and accordingly disallowed the claim of depreciation - HELD THAT:- As apparent that treating the entire business income as income from other source of the assessee was due to the reason that the assessee could not prove her business of providing video coverage. There is no finding by the Revenue that the assessee did not own any depreciable asset against which she cannot claim depreciation. From the enquiries made by the AO it is apparent that the assessee owned shop and was in the business during the earlier years.
Revenue has not been able to point out the source from which the assessee had earned the income which she has declared in her return of income - It cannot be presumed that the assessee was not at all carrying out any business activity during the relevant assessment year with respect to providing the service of video coverage - it is not the case of the Revenue that the assessee did not own any depreciable asset for not allowing the claim of depreciation. Hence, the disallowance made by the learned AO does not seem to be justified.
Disallowance of agricultural income - Revenue has rejected the claim of the assessee only on the basis that the assessee has not proved with documentary evidence that she has earned agricultural income - HELD THAT:- In normal circumstances for petty farming activity it is difficult or sometimes not practicable to maintain documentary evidence for carrying out agricultural activities. In such situation, though the onus is on the assessee to establish that agricultural activities were carried out, the Revenue should also give some leverage by verifying the facts stated by the assessee before simply disregarding their explanation.
In the present case of the assessee, the Revenue has not made any efforts to verify the claim of the assessee. Moreover, since the agricultural income declared by the assessee is quite nominal considering the extent of land holding we are of the considered view that the addition made by the Revenue by treating the agricultural income as income from other source is not warranted. Hence, we hereby direct the AO to treat the amount as agricultural income of the assessee and thereby delete the addition.
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2016 (9) TMI 1655 - GUJARAT HIGH COURT
Nature of expenses - expenses incurred for replacement of membrane cells - revenue or capital expenditure - Principle of consistency - whether membrances were integral part of plant without which the plant cannot function effectively and that, it has enduring benefit for at least 2 or 3 years? - Tribunal deleting the addition treating the same as capital expenditure - HELD THAT:- As identical issue came up for consideration before this Court in case of this very assessee for earlier year [2016 (8) TMI 1462 - GUJARAT HIGH COURT ] attempt to contend that life of membrane would be spread over from 3 to 5 years or that the amount involved for replacement of membrane is huge and, therefore, the departure on the part of the Revenue could be said as justified, in our view, cannot be countenance for two reasons. One is that the amount involved would not make difference for chargability of the tax but the nature of expenditure would be relevant for the chargability of tax.
It hardly matters whether the amount is more or less. Further, on the aspect of life of the membrane, nothing is referred to by the A.O. nor by C.I.T. (A) that earlier, such aspect, namely, life of the membrane spread over from 3 to 5 years was not considered or it had missed or otherwise. See Gujarat Alkalies and Cheimcals Ltd [2015 (2) TMI 118 - GUJARAT HIGH COURT] - Decided against revenue.
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2016 (9) TMI 1654 - ITAT MUMBAI
Disallowance of interest u/s 14A - addition to the extent of 0.50% of average investment towards expenditure for administrative purposes - Sufficiency of own fund - interest-free funds available or not? - HELD THAT:- This matter has continuously arisen in various years in assessee’s own case and has already been settled in favour of the assessee in assessee’s own case [2014 (7) TMI 503 - ITAT MUMBAI], [2014 (7) TMI 763 - ITAT MUMBAI] if the assessee has huge funds which also consist of interest free funds, then presumption would be that investments have been made out of interest free funds, available with the assessee and, therefore, interest cost cannot be made attributable.
Thus a perusal of the same shows that the net worth of the assessee as on 31.03.2010 is far more than the exempt yielding investments made by the assessee as on that date. Decided in favour of assessee.
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2016 (9) TMI 1653 - TRIPURA HIGH COURT
Dishonour of Cheque - legally enforceable debt or not - rebuttal of presumption or not - only ground that was taken in the appeal is that two cheques were handed over by the accused-complainant as security to secure the loan for which Section 138 of the N.I. Act cannot be attracted - HELD THAT:- The basic principle of applying a precedent in the criminal jurisprudence is that the ratio that has been laid down by a particular judgment has to be first construed in the backdrop of its peculiar circumstances. If the facts and circumstances are identical and not subject to distinction then only the principle as laid can be applied. But there can be another way of looking at the precedent is that when the precedent interprets a provision having due regard to the scheme of the Act that can be imported for purpose of applying in the future cases - In this case, the petitioner did not adduce any evidence and the complainant, the respondent No. 1 herein, has proved that he provided the loan much before the cheques were issued. On the face of such evidence it cannot be held that the cheques [Exbt. 1 and 2] were issued for securing the loan. Moreover, when the cheques are admitted by the petitioner issued the court is bound to presume under Section 139 read with Section 118 of the N.I. Act that the cheques were issued for discharging in whole or in part of any debt or other liability. The law has developed and now it is no more res integra that under Section 139 of the N.I. Act a statutory presumption which has a evidentiary value can be drawn.
In M.S. Narayana Menon alias Mani vs. State of Kerala & Anr. [2006 (7) TMI 576 - SUPREME COURT], it has been held that once the accused is found to discharge his initial burden, it shifts to the complainant.
The petitioner being the accused did not discharge his initial burden in any way and as such there is no infirmity in the finding of conviction. Hence, this court cannot called upon to interfere the impugned judgment - Petition dismissed.
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2016 (9) TMI 1652 - DELHI HIGH COURT
Condonation of delay - appeal is hopelessly time barred – by 670 days - HELD THAT:- The explanation given and heard cannot be termed as constituting “sufficient cause” requiring condonation of delay.
TP Addition - In addition to the delay, the revenue had appealed against an earlier order in respect of a similar direction by the ITAT [2015 (5) TMI 436 - DELHI HIGH COURT]. The court had upheld the decision even while requiring the TPO to take into consideration rule 10(B) of the Income Tax Rules while carrying out the ACP exercise.
The court had in the assessee’s appeal [2016 (7) TMI 1055 - DELHI HIGH COURT] also held in addition that an appropriate method would be TNMM - TPO is hereby directed to follow the directions of this court for AY 2009-2010 contained in both the appeals of the assessee and the revenue as well.
Appeal is disposed of.
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2016 (9) TMI 1651 - SC ORDER
Deduction u/s 80IA - loss carry forward and set off against the income from the year in which the assessee started claiming deduction u/s 80-IA - HELD THAT:- We have heard learned counsel for the parties and are of the opinion that the issue involved in these matters has already been decided by this Court in the case of Assistant Commissioner of Income Tax, Tirupur vs. M/s. Velayudhaswamy Spinning Mills Pvt. Ltd.2016 (11) TMI 373 - SC ORDER] - As a consequence, all these civil appeals as well as special leave petitions are dismissed.
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2016 (9) TMI 1650 - ITAT KOLKATA
TP Adjustment - Selection of MAM - provision under the Act with regard to the value of the transactions for selecting the method for the determination of ALP - TPO rejected TNMM Method - HELD THAT:- In the instant case the TPO has rejected the transfer pricing study of the assessee without finding any defect therein. TPO further held that the international transaction is less than the 5% to the business therefore he adopted the other method for determining the ALP. But contrary to his finding the TPO has accepted the other international transactions where the volume was again less than 5% to the total turnover of the assessee i.e. Royalty, commission etc. In the earlier years and subsequent years the assessee entered into internationals transactions with similar value but no addition was made. Therefore it was not open to the TPO to take a different base for the working of ALP without assigning cogent reasons than that of the method followed consistently.
Arguments of the DR that the TPO did not reject the TNMM Method on the ground that CP Method & RP Method were used by the assessee in earlier year but the TPO worked the ALP of the International transactions on the basis of functional analysis do not hold good. In our view before adopting the CPM/RPM, the TPO had to first reject TNMM and that too with reasons for the rejection.
TPO has considered only cost of raw materials consumed and no other associated costs was considered in arriving at the G.P. margin.TPO in order to apply CP Method cost pertaining to raw materials, labour, factory overheads, direct & indirect expenses etc should take into consideration. All the aforesaid cost heads are included for determination of the 'cost of goods sold' as per Rule 10B of the I.T. Rules, 1962 which lays down the manner in which the CP method is to be applied.
The profit margins varied significantly depending upon the fact that the products were either sourced locally or imported. Assessee had imported printing inks from AEs worth Rs. 7.06 crores which was sold to unrelated parties for Rs. 8.09 crores resulting in gross profit margin of 13%. Correspondingly the assessee had imported press chemicals from unrelated parties worth Rs. 1.75 crores which was sold to unrelated parties for Rs. 2.02 crores yielding profit margin of 14%.
Without prejudice to the assessee's contention that the aforesaid margins would require turnover adjustment and working capital adjustment, it was observed that the margin was 13% earned from transactions with related parties was found comparable to margin of 14% earned from uncontrolled transactions and was therefore held to be at arm's length by the CIT(Appeals). The difference in margin of 1% was well within the permitted range of +/ - 5% allowed in second proviso Section 92C of the Income-tax Act, 1961. In view of above we do not find any infirmity in the order of the ld. CIT(A). Hence we allow assessee’s ground.
Deduction u/s. 80HHC for the profit of the business - CIT(A) directing the AO not to use service charge amounting to Rs 90 lakhs in the total turnover while computing deduction - HELD THAT:- We find that issue is squarely covered in favour of assessee in assessee’s own case - Respectfully following the decision of the Co-ordinate Bench we dismiss the appeal of the Revenue.
Deduction of custom duty against the advance license and thereby violating the provision of Sec. 43B - HELD THAT:- At the outset, we find that the aforesaid amount had already been taxed in earlier year i.e. 2003-04 as evident from the AO’s order. At the time of hearing, Ld. DR did not bring any contrary to the finding of Ld. CIT(A). From the foregoing discussion, we find no reason to interfere in the order of Ld. CIT(A) and we uphold the same and Revenue’s ground is dismissed.
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2016 (9) TMI 1649 - ITAT CHENNAI
TP Adjustment - Disallowance of pre-commencement expenditure - admission of the additional evidence - Whether APA [Advance Pricing Agreement] was crucial in determining the ALP of the international transactions of the assessee?- HELD THAT:- APA has considerable bearing for the years under appeal, since prima facie, the rollback of four years which went to assessment year 2011- 12, was curtailed to three years.
Obviously, the curtailment was allowed in the APA after considering the submissions of the assessee that it had become a contract manufacturer only in financial year 2010-11 pursuant to labour upheaval. Ld TPO in the orders for all the impugned assessment years had considered assessee to be a contract manufacturer and in his order for assessment year 2009-10, this is specifically mentioned at page 69 of the order.
Nature of business of the assessee would have considerable bearing on the Arm’s Length Pricing study of the international transactions with its AEs.
APA having been signed on 24.5.2016, assessee had no occasion to produce it before lower authorities. We are, therefore, of the opinion that the additional evidence has to be admitted. We, therefore, admit the additional evidence, set aside the orders of the lower authorities and remit all the issues back to the AO/TPO for consideration afresh in accordance with law. Appeals of the assessee for all the years are allowed for statistical purposes.
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