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2021 (11) TMI 1133 - AUTHORITY FOR ADVANCE RULING, CHHATTISGARH
Classification of services - rate of GST - Pure Services - composite supply - works contract service - providing Man Power Service which includes providing of Technical personal, Data Operator, House Keeping Service etc. to different State Government and Central Government Department - applicability of Sr. No. 3 of Notification No. 12/2017-CT dated 28.06.2017 - HELD THAT:- To avail the benefit of clause 3 of the Notification No 12/2017, three conditions should be satisfied. Firstly, pure services (excluding works contract service or other composite supplies involving any goods) should be provided, secondly, it should be provided to the Central Government, State Government or Union territory or local authority or a Governmental authority and thirdly it should be by way of any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution or in relation to any function entrusted to a Municipality under article 243W of the Constitution. Supply of man power as discussed above provided by business entities like the applicant, not involving any supply of goods would be treated as supply of pure services also the applicant has submitted that they are providing the same to Central / State Government.
The interpretation by the applicant that their activity/services of providing Man Power Service involving providing of Technical personal, Data Operator, House Keeping Service etc. to different State Government and Central Government Department in the nature of pure service are functions entrusted to the Municipality and Panchayat, covered under article 243G and 243W of the Constitution is misplaced and devoid of merit. The act of providing man power to Central / State Government by the applicant can by no stretch of imagination be linked to an act of discharging any sovereign functions as envisaged and covered under the functions entrusted and as specified to municipalities / panchayats under 243G/243W of the Constitution of India. Nothing is in record to establish that the activity / provision of service of manpower which includes providing of technical personal, data operator, housekeeping service etc. by the applicant to different State Government and Central Government Department have any direct and proximate relationship with any of the activities listed in Article 243G or Article 243W read with Eleventh Schedule and Twelfth Schedule of the Constitution of India.
No evidence to relate the aforesaid activities or relate the same to functions as envisaged under covered under the functions entrusted and as specified to municipalities /panchayats under 243G/243W of Constitution of India is forthcoming. In the present case the applicant, a business entity performing the business activity of provision of service of manpower viz. providing of technical personal, data operator, housekeeping service etc. to different State Government and Central Government Department can in no way be termed or equated to performing a sovereign function as envisaged under Article 243G or Article 243W of the Constitution.
The activity of provision of service of manpower viz. providing of technical personal, data operator, housekeeping service etc. to different State Government and Central Government Department by the applicant though being a “pure service”, is not any sovereign function as envisaged under Article 243G or Article 243W of the Constitution - the activity of provision of service of manpower is not eligible for NIL rate of GST, provided under Sr. no. 3 of Notification No, 12/2017-Central Tax (Rate), dated 28-6-2017. The aforesaid activity of manpower supply attracts CGST@ 9% and CGGST@ 9%, classifiable under SAC 998513.
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2021 (11) TMI 1132 - ITAT DELHI
TP adjustment - international transaction pertaining to purchase of traded goods - selection of MAM - HELD THAT:- We have also perused the order of the coordinate bench in assessee’s own case in earier years. We appreciate the arguments of the parties with respect to the risk assumed by the normal distributor as well as the risk assumed by the assessee. However we find that the issue is squarely covered by the decision of the coordinate bench in assessee’s own case [2018 (7) TMI 2083 - ITAT DELHI] findings returned by TPO/DRP that the taxpayer being a full-fledged risk bearing distributor performing numerous functions, RPM is not the MAM, is not sustainable for the reason that in a comparable uncontrolled transaction, normally distributor requires to carry out all the functions necessary to enhance the sales like market research, inventory risk, credit risk etc.. In such circumstances, no comparable instances have been brought on record by the TPO/DRP.
When finished goods purchased by the taxpayer are resold in the market without any value addition, then gross margin earned on such transaction is the only determinative factor to analyse gross compensation after the cost of sale. So, we are of the considered view that RPM in this case is the MAM to bench mark the international transactions. In these circumstances, addition made by the TPO/AO merely by disputing the method applied by the taxpayer is not sustainable in the eyes of law. Method for benchmarking the international transaction cannot be changed merely because of the fact that the taxpayer has suffered loss at the net level but has positive gross profit in trading segment as it depends on host of circumstances.
We allow ground of the appeal of the assessee and direct the ld TPO to adopt the resale price as the most appropriate method and compute the difference in ALP thereafter. TPO is directed to examine the transfer pricing analysis and decide the issue afresh.
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2021 (11) TMI 1131 - KARNATAKA HIGH COURT
Depreciation on assets leased to others - HELD THAT:- Substantial question of law No.1 raised by the revenue, the issue is no more res integra in view of the ruling of this Court in the assessee’s own case [2020 (11) TMI 344 - KARNATAKA HIGH COURT] wherein the order of disallowing depreciation of asset had been answered in favour of the assessee.
MAT applicability u/s 115JB on banking companies - HELD THAT:- Substantial question of law which has been admitted by this Court as aforesaid, the Co-ordinate Bench of this Court in M/s.ING Vysaya Bank Limited[2020 (1) TMI 1116 - KARNATAKA HIGH COURT] has categorically held that the provisions of Section 115JB(2) of the Income Tax Act, 1961 do not apply to the Banking Companies. We have no reason to differ from the same. Accordingly, we answer the said substantial question of law in favour of the assessee and against the revenue
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2021 (11) TMI 1130 - AUTHORITY FOR ADVANCE RULING, CHHATTISGARH
Input tax credit - rent bill issued by the service provider who has provided Buses on rent to the applicant - applicability of Sr. No. 8 (vi) of Notification No. 11/2017-CT (Rate) Dated 28.06.2017 - HELD THAT:- The eligibility of Input Tax credit is as per the provisions contained under Section 16 subject to the restrictions as stipulated supra under Section 17 of the CGST Act, 2017. It appears that the applicant is under the misplaced notion that eligibility of Input Tax Credit is governed under the provisions of Notification no. 11/2017-CT(Rate) dated 28.6.2007 as amended, whereas it is not so, in as much as non-availment of ITC is a pre-condition for availing the benefit of applicable tax rate for the services rendered by the applicant as provided under the said Notification - For the impugned “Passenger transport services “of Heading 9964, viz. “Transport of passengers by any motor vehicle designed to carry passengers where the cost of fuel is included in the consideration charged from the service recipient”, in as much as eligibility to the tax rate as stipulated under sr. no 8(vi) of Notification no. 11/2017-CT(Rate) dated 28.6.2017 as amended is concerned, the same is fully dependent on the condition of availment or otherwise of the Input tax credit by the applicant.
The applicant would be eligible to input tax credit on the input services provided they fulfill the conditions as stipulated under section 16 read with section 17 of the CGST Act, 2017, whereas eligibility or otherwise of the tax rate as provided under sr. no. 8(vi) of Notification no. 11/2017-CT(Rate) dated 28.6.2007, as amended vide Notification No. 31/2017-C.T. (Rate), dated 18-10-2017 read with Explanation no. (iv) therein is subject to the pre-condition that Input tax credit of input tax charged on goods and services used in supplying the service, other than the input tax credit of input service in the same line of business (i.e. service procured from another service provider of transporting passengers in a motor vehicle or renting of a motor vehicle), has not been taken.
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2021 (11) TMI 1129 - ITAT BANGALORE
TP Adjustment - comparable selection - assessee in engaged in the business of provision of Software Development Services (SWD services), to its wholly owned holding company - HELD THAT:- Companies functionally dissimilar with that of assessee is directed to be deleted.
Deduction u/s 80JJAA - AO denied the claim of the assessee for deduction as that persons working in software units cannot be regarded as workmen as contemplated by the provisions of section 80JJAA AND Deduction under section 80JJAA cannot be allowed in respect of additional wages paid to employees who are working in 10A units because under the provisions of 80A(4) of the Act, the assessee cannot enjoy benefits both under sections 10A and 80JJAA of the Act in respect of the same income. - DRP also took the view that, the assessee has not given Form 10DA for each 10A unit separately - HELD THAT:- As assessee has accepted the decision of the DRP in so far as ground No.6.1 is concerned and is willing to give the details as per each unit. The deduction can therefore be considered for each 10A unit separately. The assessee is directed to furnish the necessary details in this regard and the AO may examine the same in accordance with law.
As in assessee’s own case for Assessment Year 2007-08 [2016 (6) TMI 1333 - ITAT BANGALORE] sub-section 1 of 80JJAA clearly show that the deduction is given on profits and gains derived from industrial undertaking engaged in manufacture of production of article or thing. It is only for quantification of the amount that 30% is applied. In our opinion the deduction is very much linked to the profits of the undertaking. We are therefore unable to accept this line of argument taken by the counsel. In the result, we hold that assessee is not eligible for deduction u/s.80JJAA of the Act, in respect of its units 2 , 3 and 4. However, denial of such claim in respect of unit-1, where it was not claiming any deduction, in our opinion is incorrect. We, therefore set aside the orders of authorities below for the limited purpose of quantifying the eligible deduction u/s.80JJA in respect of Unit-1.
Employees engaged in software industry cannot be regarded as workmen for the purpose of section 80JJAA - Thus ground should be decided in the light of the directions given above by the AO afresh after affording opportunity of being heard to the assessee.
Adjustment made under section 40(a)(ia) in arriving at the profits from business eligible for a deduction under section 10A - HELD THAT:- There is no dispute regarding genuineness of the expenditure that was disallowed and the fact that the said expenditure is otherwise allowable as deduction in computing income from business. In such circumstances, even if the expenditure is disallowed u/s.40(a)(i) of the Act, the result will be that the disallowance will go to increase the profits of the business which is eligible for deduction u/s.80-IC of the Act and consequently the deduction u/s.10A of the Act should be allowed on such enhanced profit consequent to disallowance u/s. 40(a)(i) of the Act. In this regard, we find that two High Courts viz., in the case of CIT v. Gem Plus Jewellery India Ltd.[2010 (6) TMI 65 - BOMBAY HIGH COURT] and ITO vs. Kewal Construction[2013 (7) TMI 291 - GUJARAT HIGH COURT] have taken the view that when disallowance u/s. 40(a)(ia) of the Act goes to enhance the profits that are eligible for deduction under Chapter VIA of the Act, the deduction under Chapter VIA should be allowed on such increased profit. This position has also been now confirmed by the CBDT in its Circular No.37/2016 dated 02.11.2016.
In view of the aforesaid decisions and the CBDT Circular No.37/2020, we are of the view that there is no merit in ground no.4 raised by the revenue.
Exclusion of expenses incurred in foreign currency from total turnover and export turnover while computing deduction u/s.10A - HELD THAT:- Taking into consideration the decision rendered in the case of CIT v. Tata Elxsi Ltd [2011 (8) TMI 782 - KARNATAKA HIGH COURT] we are of the view that communication charges and expenses incurred in foreign exchange should be excluded both from export turnover and total turnover. We are of the view that as of today, law declared by the Hon'ble High Court of Karnataka which is the jurisdictional High Court is binding on us. Moreover, the order of the Hon’ble Karnataka High Court has been upheld in the case of CIT v. HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] The ground of the revenue is therefore dismissed.
Allowance of deductible expenses education cess - HELD THAT:- This issue is settled by APTEAN INDIA PVT. LTD. VERSUS THE DY. COMMISSIONER OF INCOME TAX, CIRCLE-1 (1) (2) , BENGALURU. [2020 (11) TMI 958 - ITAT BANGALORE] wherein it was held that education cess and secondary and higher education cess is deductible as business expenditure under section 37 (1) of the Act for determining the assessed income. As per TATA STEEL LIMITED case [2019 (12) TMI 750 - ITAT MUMBAI]education cess and secondary and higher education cess is not in the nature of tax which is not deductible expenditure. Following the decisions referred to above, we allow the additional ground of appeal.
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2021 (11) TMI 1128 - GUJARAT HIGH COURT
Reopening of assessment u/s 147 - applicability of the provisions of sections 148 and 148 A - the new provisions which have been inserted by Finance Act 2021 with effect from 01.04.2021 - According to the petitioner, the Financial Act has substituted the provision of section 147 with effect from 01.04.2021 and the time limit has been set to issue the notice under section 148 which is extended by Notification No.20 of 2021 and 38 of 2021, there cannot be two parallel provisions applicable simultaneously - validity of Notification No.20 of 21 issued by the CBDT by purportedly exercising the powers conferred by section 3 (1) of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.
HELD THAT:- We have heard the learned advocate, Mr.Sudhir Mehta for the petitioner. It is urged fervently that even the Revenue Authorities could not have extended the operation of repealed provision of section 148 beyond 31.03.2021 under the guise of a clarificatory explanation in the notifications.
Issue NOTICE to the respondents, returnable on 22.11.2021. Pleadings be completed and office of learned Additional Solicitor General shall be served through e-mail as well as speed post.As the petitioner has made out a prima facie case, ad-interim order in terms of paragraph 17(e) till the returnable date.
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2021 (11) TMI 1127 - CESTAT BANGALORE
Recovery of CENVAT Demand - input services or not - eligibility of CENVAT credit on the services used for setting up of the new Technology Centre - effect of amendment brought into Rule 2(l) ibid vide Notification No.3/2011- C Ex.(NT) dated 1.3.2011, effective from 1.4.2011 - period of dispute involved in this case is from October 2011 to March 2016 - HELD THAT:- The definition of ‘input service’ was amended with effect from 1.4.2011. under the un-amended definition, the phrase ‘setting up’ was specifically provided in the inclusive part for consideration as input service. However, the said phrase was deleted in the amended definition from 1.4.2011. Accordingly, the department had entertained a belief that in view of deletion of such phrase in the definition clause, the appellant should not be eligible for the benefit of consideration of the disputed services as input service. On perusal of the definition of ‘input service’ contained in the CENVAT statute, it transpires that the services used either directly or indirectly, in or in relation to the manufacture of final product should be considered as input service.
In this case, it is an undisputed fact that the appellant had availed CENVAT credit on the disputed services for setting up of new Technology Centre and that by utilising such facility, it had provided the output services defined under the service tax statute. Since the disputed services were ultimately meant for accomplishing the objective of providing the output service, it cannot be said that since, the phrase ‘setting up’ was specifically excluded in the inclusive part of definition of input service, the benefit of CENVAT credit should not be available. Even though, such phrase was deleted in the inclusive part of the definition of input service with effect from 1.4.2011, but the main part of such definition clause has considered within its ambit such phrase as input service for the purpose of availment of CENVAT credit of service tax paid on the disputed services. Thus, the denial of CENVAT benefit on the disputed services cannot be sustained.
There are no merits in the impugned order insofar as it has denied the CENVAT benefit and confirmed the adjudged demands on the appellant - appeal allowed.
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2021 (11) TMI 1126 - KERALA HIGH COURT
Reopening of assessment u/s 147 - Denial of natural justice - necessity to provide sufficient opportunity to the petitioner to respond - AO proceeded to assess the assessee by the orders impugned in this case when they failed to respond within 48 hours of serving the show cause notice - HELD THAT:- Consideration of the objections raised by an assessee is the platform from which the rights and obligations of the asses plicit provisions of Section 144(B) (1)(xxii) of the Act, the assessee will be put to prejudice.
It is clear from the circumstances that have transpired in the instant case, from the time of show cause notice till the date of assessment, for both the assessment years, that the show cause notices failed to privide sufficient opportunity to the petitioner to respond. The violation of principles of natural justice in the orders impugned is manifest.
Accordingly the orders of assessment produced shall stand set aside and the 1st respondent is directed to pass fresh orders of assessment after granting a reasonable opportunity of being heard after granting it sufficient time to file an objection to the petition to show cause notice. The objections, if any, to the show cause notices shall be filed by the petitioner within a period of 15 days from the date of receipt of a copy of this judgment and the assessing authority shall thereafter, fix a date for hearing of the petitioner.
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2021 (11) TMI 1125 - RAJASTHAN HIGH COURT
Assessment of Income of assessee - gross profit rate shown by the assessee is 29.29% as compared to the gross profit fate of 27.87% shown in the immediately preceding year - technical mistakes in maintaining the books of accounts - HELD THAT:- ITAT has found that during the year under consideration, the gross profit rate shown by the assessee is 29.29% as compared to the gross profit fate of 27.87% shown in the immediately preceding year. The ITAT is of the opinion that the gross profit rate shown during the very year is much better than the gross profit of preceding year and, in such circumstances, there is justification for complete decline of contract expenditure claimed by the asssessee, which goes to constitute the gross profit rate.
ITAT has further taken into consideration the profit and loss accounts of the assessee for comparison of expenses and found that the same are in order. After finding the gross profit shown by the assessee as reasonable, the ITAT has found that the assessee’s claim of interest expenditure and depreciation is required to be allowed.
In our opinion, the ITAT after thoroughly examining the material available on record has assessed the income of the assessee and according to us, the same is essentially a question of fact and appreciation of evidence. After going through the entire material available on record, the ITAT has come to the conclusion, which in our view is not liable to be interfered with. Learned counsel for the Revenue has failed to point out any perversity in the finding of fact recorded by the ITAT. No substantial question of law requiring adjudication by this Court under Section 260-A
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2021 (11) TMI 1124 - ITAT PUNE
TP Adjustment - upward adjustment in respect of advertisement and marketing ('A&M') expenses - existence of international transactions - TPO as well as the Hon’ble DRP inferred the existence of international transactions on noticing that the appellant had incurred excess expenditure on A&M expenses as compared to the expenses incurred by the comparables chosen by the TPO and then proceeded to make adjustments of difference in order to determine the value of such A&M expenses incurred by the AE - HELD THAT:- main contention advanced by the appellant is that the existence of international transaction cannot be inferred by the TPO in the absence of any actual transactions and the presumption by the lower authorities that the benefit had enured to its foreign AE is merely based on the conjectures. In the absence of any agreement between the assessee and its foreign AE to incur any A&M expenses to the benefit of its foreign AE, the presumption of existence of international transaction is incorrect.
An identical issue was considered by the Co-ordinate Bench of Tribunal in assessee’s own case for immediately preceding A.Y. 2009-10 wherein the Co-ordinate Bench of the Tribunal after making reference to the decision of Sony Ericsson India Pvt. Ltd. [2015 (3) TMI 580 - DELHI HIGH COURT] and in the case of Maruti Suzuki India Ltd. [2015 (12) TMI 634 - DELHI HIGH COURT] and placing reliance on Essilor India Pvt. Ltd. [2016 (3) TMI 959 - ITAT BANGALORE] held that in the absence of agreement between the assessee and its foreign AE to incur the advertising and marketing expenses to the benefit of foreign AE, no inference can be drawn as to the existence of international transaction on mere incurring excess expenses on the marketing and advertisement as compared to the expenditure incurred by the comparables. It was further held that in the absence of any machinery provisions to compute arm's length price provision, the provisions of Chapter X cannot be invoked and bright line test cannot be used either to determine the existing international transaction or its arm's length price -ground of appeal No.1 filed by the Revenue is devoid of merit and stands dismissed.
Determination of arm's length price with regard to the transaction of import of raw materials - HELD THAT:- It is settled position of law that comparison should be between the tested party and the controlled transaction. A controlled transaction has been defined to mean that a transaction entered into between two associated enterprises and therefore, we are of the considered opinion that the lower authorities were justified in not giving any credence to the certificates issued by deemed AEs. However, in the light of additional evidence filed before us in the form of price list obtained from the third parties, we remit the matter back to the file of AO / TPO with a direction to undertake the exercise of benchmarking the transaction of import of raw material taking cognizance of price list furnished by the assessee from the third party vendors and to restrict any TP adjustment only in respect of AE transactions as following case of (i) CIT vs. Hindustan Unilever Ltd. [2016 (7) TMI 1245 - BOMBAY HIGH COURT] and (ii) CIT vs. Ratilal Becharlal & Sons[2015 (11) TMI 1524 - BOMBAY HIGH COURT] - Thus, this ground of appeal stands partly allowed.
TDS u/s 194J - Addition on account of management cost - AO disallowed the expenditure for non-deduction of tax at source treating the same as expenditure under the provision of managerial services - HELD THAT:- There is no material on record to show that the HUL had provided any services like technical or managerial in nature to the appellant company. Mere reimbursement of salary of employees does not constitute provision of managerial services. When the expenditure is a mere reimbursement of salary of employees deputed, the question of deduction of tax at source does not arise in the light of the decisions of Siemens Aktiongesellschaft, [2008 (11) TMI 74 - BOMBAY HIGH COURT] (ii) CIT vs. Industrial Engineering Projects (P.) Ltd.[1992 (7) TMI 38 - DELHI HIGH COURT] ; and, (iii) CIT vs. Dunlop Rubber Co. Ltd.,[1982 (2) TMI 24 - CALCUTTA HIGH COURT]. Therefore, we are of the considered opinion that the provisions of section 194J of the Act have no application to the subject payment. Accordingly, the Assessing Officer is not justified in invoking the provisions of section 40(a)(ia) - Decided in favour of assessee.
TDS u/s 194H - Disallowance on account of selling discount given to HUL - As submitted that the HUL is the distributor of products of the appellant company and selling discount was given to the HUL towards the sale cost - HELD THAT:- The expenditure in question was incurred towards the selling discount given to the distributor stockists. The relationship between the appellant and the distributor was that of the principal to principal. No services were rendered by the distributor to the appellant company and what was offered to the distributor was discount under the sales promotion schemes and, therefore, it cannot be said that the discount is in the nature of commission within the meaning of Explanation 1 to section 194H of the Act as held in the case of Intervet India Pvt. Ltd.[2014 (4) TMI 353 - BOMBAY HIGH COURT] and CIT vs. Piramal Healthcare, [2015 (1) TMI 873 - BOMBAY HIGH COURT] - we are of the considered opinion that the Assessing Officer is not justified in invoking the provisions of section 40(a)(ia) of the Act while disallowing the selling discount.
Disallowance u/s 40(a)(ia) being the payment made to Star India Pvt. Ltd. towards advertisement charges - AO disallowed the expenditure on the ground that no TDS was made on said payment - HELD THAT:- We find force in the alternative submission made on behalf of the appellant that the benefit of second proviso to section 40(a)(ia) of the Act be examined by the Assessing Officer after due verification of the evidence in support of the same. In the circumstances, we remit this ground of appeal back to the file of the Assessing Officer for limited purpose of examining the applicability of second proviso to section 40(a)(ia) of the Act. Thus, the ground of appeal no.10 stands partly allowed for statistical purposes.
Denial of credit for dividend distribution taxes paid by the appellant - HELD THAT:- On perusal of the assessment order, we find that the Assessing Officer had not granted credit for dividend distribution taxes paid by the appellant without assigning any reason. In these circumstances, this ground of appeal is also remitted back to the file of the Assessing Officer with a direction to grant a credit for dividend distribution taxes paid by the appellant after due verification.
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2021 (11) TMI 1123 - ITAT SURAT
Benefits of principle of mutuality - As per AO activity carried out by the assessee is not a charitable one and the assessee is earning heavy surplus by charging the members as per its discretion and is indulged in transactions with non-members which vitiates the principle of mutuality on the first place - HELD THAT:- AO denied the benefit of concept of mutuality by taking view that the department has already filed against the earlier decision of Tribunal in various years. CIT(A) allowed relief to the assessee by following the decision of Tribunal in assessee’s own case for earlier year - We note that assessee’s own case for AY 2010-11 [2018 (3) TMI 1983 - ITAT SURAT] the co-ordinate bench of Tribunal while following the order in earlier year accepted the status of assessee as a mutual association in order [2018 (3) TMI 1983 - ITAT SURAT] - No contrary facts or law is brought to our notice to take other view. Thus, we affirm the order of Ld. CIT(A) - ground No.1 raised by Revenue is dismissed.
Disallowance of depreciation by not reducing the contribution of members for acquisition of assets while computing depreciation - We find that in earlier year on similar submission of parties the authorities below recorded that the assessee is also getting services from nonmembers which has to be taxed accordingly. However on disallowance of depreciation, it was held that there is principle of mutuality in case of assessee, therefore, the allowance of depreciation has no bearing as the principle of mutuality was accepted by Tribunal. However, the issue was remitted back for limited purposes with the following direction in [2018 (3) TMI 1983 - ITAT SURAT] - ground No.2 raised by Revenue is allowed for statistical purposes in above terms.
Disallowance of loss on sale of fixed asset and deleting the addition on account on account of late payment of TDS and penalty charges respectively - HELD THAT:- We find that Assessing Officer disallowed the expenses on account of loss on sale of fixed asset and interest on late payment of TDS and penalty charges. CIT(A) allowed relief to the assessee by taking view that the assessee has not claimed deduction of such items. We find that assessee has not claimed deduction of such claim on the basis of principle of mutuality. The Ld. CIT(A) accepted the contention of assessee that once the expenses is not claimed as the deduction of no disallowance is sustainable. Ld. CIT(A) has accepted the contention of the assessee that no disallowance was claimed is permissible. Thus, we find that order of Ld. CIT(A) is affirmed.
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2021 (11) TMI 1122 - ITAT DELHI
TP Adjustment - international transaction entered into by the assessee with respect to management services fees paid by the assessee to its Associated enterprises - assessee benchmarked the same under the Transactions Net Margin Method clubbing the same with other transactions - Arms’ length price of the same is determined by the ld TPO at Rs. Nil as assessee failed to satisfy Need test, benefit Test, Rendition test etc. the ld CIT(A) confirmed it - only objection of the ld TPO which is threshold of examination of any services rendered is only whether the services have been rendered or not - HELD THAT:- The details of number of test is devoid by them is also tabulated and same is multiplied by the rate of services each day. This is the supporting attached with the bills of services. Coming to the agreement which is placed at page No. 242 to 249 of the Paper Book. The clause NO. 2 shows that the rate of compensation which would be @ times spent by the service provider employeed in rendering the service. It has also given the charge out rate as per annexure B. However, as the charge out rate are attached for the period April 2002 to March 2006. No such charge out rates are available for FY 2011-12. In view of this the supporting of rendition of the service required verification along with rates for this year.
It was also not known whether the services are rendered from Hong Kong or from US. This, is so because the rate of the employees are different for this region. Further, merely the annexure at page No. 252 onwards does not show evidence of the rendition of the services, it is merely a breakup of the invoice. In view of this fact, we set aside the whole issue back to the file of the ld TPO with a direction to the assessee to show the actual data, person involved, actual rate as per agreement, rate paid by the assessee as per invoices, technological competence of the persons rendering services to show that services were actually rendered and benefit derived by the assessee.
The assessee is also required to show that 3rd party would pay for such services and they are not duplicative in nature. On assessee providing all these details, the ld TPO is directed to examine the same and decide the arms length price of such transaction afresh. The need and benefit test should be left to the wisdom of the assessee. In the result ground No. 1 and 2 of the appeal are allowed with above direction - Appeal of the assessee is partly allowed for statistical purposes.
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2021 (11) TMI 1121 - ITAT PANAJI
Deduction u/s 80P(2)(d) - income received from cooperative banks - AO as well as CIT(A) was of the opinion that the same does not call for exemption u/s 80P(2)(d) of the Act as they were received from a cooperative bank - HELD THAT:- The reasoning of the lower authorities cannot be sustained in the eyes of law as the cooperative banks also the spies of the cooperative societies and continue to be cooperative society despite the fact that they enjoy the licence from Reserve Bank of India to carry out the business of the banking.
Whether the cooperative banks is also cooperative society or not? - This issue was considered in the case of CIT vs. Totagars Cooperative Sale Society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] wherein referring to the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. [2010 (2) TMI 3 - SUPREME COURT] held that the exemption is not to be denied in respect of interest income on investment as same falls under the provisions of section 80P(2)(d) and not u/s 80P(2)(a)(i) of the Act.
Thus we hold that the interest income earned by the appellant society on investment made with the cooperative bank which are also cooperative societies is exempt from the Income Tax Act u/s 80P(2)(d) of the Act. Therefore, we hold that the lower authorities was not justified in denying the claim of deduction u/s 80P(2)(d) - Decided in favour of assessee.
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2021 (11) TMI 1120 - ITAT JAIPUR
Revision u/s 263 by CIT - deduction u/s 80P(2) - PCIT however referred to the Banking Regulation Act of 1949 and held that as per Part V of the Banking Regulation Act, a co-operative bank is different from the cooperative society and the deduction has been wrongly allowed by the Assessing officer - whether interest on FDRs placed with Jaipur Central Co-operative Bank Ltd is eligible for deduction u/s 80P(2)(d) - HELD THAT:- In case of M/s Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd,[2019 (10) TMI 759 - ITAT JAIPUR] we find that the Coordinate Bench has considered the meaning of cooperative society and cooperative bank and has referred to the decision of Totagars Co- operative sale society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT]
The Coordinate Bench thereafter held that for the purposes of section 80P(2)(d) of the Act, Jaipur Central Cooperative Bank Ltd shall be treated as co-operative society and interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction u/s 80P(2)(d) of the Act. The ld PCIT has however not considered the aforesaid decision and gone ahead and has concluded that the deduction has been wrongly allowed by the Assessing officer without verifying the said claim of the assessee cooperative society.
We find that during the course of assessment proceedings, the Assessing officer did enquire about the claim of deduction from the assessee and in response, the assessee has submitted its response which was considered and the claim of deduction was accordingly allowed. Therefore, it is not a case of lack of enquiry on part of the Assessing officer.
Also we note that even among the different benches of the same High Court, there are divergent views on the matter and in absence of decision of the jurisdictional High Court, where there are two views in the matter of a non-jurisdictional High Court in terms of construing a taxing statue and the AO has taken one of the views in the matter which favours the assessee, the view so taken by the AO, being a plausible view taken by a quasi-judicial authority cannot be held as erroneous in nature as the same is in consonance with the legal proposition laid down by the Hon’ble Supreme Court in case of Vegetable Products Ltd. [1973 (1) TMI 1 - SUPREME COURT] In the entirety of facts and circumstances of the case and in light of aforesaid discussions, we set-aside the order passed by the ld PCIT and the order of the AO is sustained. Appeal of the assessee is allowed.
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2021 (11) TMI 1119 - ITAT DELHI
Disallowance of the expenses incurred under employee stock option (‘ESOP’) scheme - HELD THAT:- Hon’ble Madras High Court in the case M/s. PVP Ventures Limited T. Nagar, Chennai [2012 (7) TMI 696 - MADRAS HIGH COURT] while the order has been passed in relation to appeal against the order u/s 263, we find that the issue of the allowability of the expenditure pertaining to ESOP has been clearly dealt by the Hon’ble High Court.
In the case of CIT Vs. Lemon Tree Hotels Ltd. [2015 (11) TMI 404 - DELHI HIGH COURT] allowed the ESOP expenditure as expenses has revenue expenditure.
Since, it can be gauged from the above judgments that the expenditure incurred in connection with the ESOP is treated as revenue expenditure, we hereby allow the ground of appeal on this issue. Since, the grounds have been allowed on merits of the case in principle, the additional evidences filed by the assessee are not required to be considered by this Court.
Allowability R&D Expenditure - HELD THAT:- DR vehemently objected to the admission of additional evidences. On going through the evidences, we have come to a conclusion that the queries raised by the CIT(A) would be answered in proper prospective and the interest of justice would be well served by admitting the additional evidences. Since, the revenue did not have the benefit of going through the evidences, we hereby remand the matter to the file of the CIT(A) to take into consideration the evidences filed and to pass a speaking order in accordance with the provisions of the Act. Appeal of the assessee is allowed.
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2021 (11) TMI 1118 - ALLAHABAD HIGH COURT
National Faceless Assessment - Non granting opportunity of hearing to the petitioner - deficit in essential procedural compliance - HELD THAT:- Issuance of first notice dated 25.09.2021 is corroborated from the assessment order itself. The first date of hearing fixed was also 27.09.2021. The request for personal hearing clearly appears to have been acknowledged by the respondent vide communication dated 27.09.2021 referred to above. Yet, the assessment order itself does not indicate, in any manner that opportunity for personal hearing was granted to the petitioner. The assessment order passed on 30.09.2021 itself corroborates the assesse's contention that the same was passed in hurry without granting opportunity of hearing to the petitioner.
Whatever be the reason for opportunity of hearing being denied to the petitioner and though it may be true that there may be some technical reason for the same, nevertheless, in the context of the assessment proceedings it was imperative on part of the respondents to grant opportunity of hearing to the petitioner where facts were disputed and the petitioner had submitted a detailed reply.
Even otherwise once the petitioner had specifically asked to be granted opportunity of personal hearing by e-mail communication and once that request had been acknowledged by the respondent-authorities, there survived no reason to deny such opportunity of personal hearing to the petitioner. Accordingly, the request for filing counter affidavit has been denied. The impugned assessment order is found to be deficit in essential procedural compliance.Respondent No. 2 may now intimate to the petitioner a fresh date of personal hearing in the matter.
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2021 (11) TMI 1117 - ITAT PANAJI
Exemption u/s 80P(2)(a)(i) - whether the appellant can be termed as a cooperative society or cooperative bank? - HELD THAT:- The undisputed position is that the appellant is registered a cooperative society under the Karnataka State Co-operative Society Act, 1959 and does not enjoy any licence from Reserve Bank of India to carry on the business of banking. It is a trite law that the assessing authority cannot go behind the registration certificate granted under the Cooperative Societies Act as held in the case of The Mavilayi Service Cooperative Bank Ltd. & ors.[2021 (1) TMI 488 - SUPREME COURT]
So long as the appellant society had not obtained any licence from Reserve Bank of India for the purpose of banking business, it cannot be termed as cooperative bank. We hold that the appellant status continued to be a cooperative society though interest income as received from its members. Thus, appellant society qualifies for exemption u/s 80P(2)(a)(i) of the Act. Thus, this issue raised by the assessee in grounds of appeal stands allowed.
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2021 (11) TMI 1116 - ITAT MUMBAI
Estimation of income - bogus purchases - HELD THAT:- It is not in dispute that assessee had made purchases from tainted dealers whose names appear in the website of sales tax department, Government of Maharashtra. It is not in dispute that the corresponding sales made by the assessee out of such disputed purchases from two parties were not doubted by the ld. AO.
It is not in dispute that assessee had submitted the details of purchases, invoice bills alongwith bank statements evidencing the fact that payments have been made to those suppliers only by account payee cheques. Since the corresponding sales made by the assessee out of the disputed purchases has not been doubted by the Revenue, we find that the ld. CIT(A) had rightly held that only the profit element needs to be brought to tax and not the entire value of the purchases. We find that this Tribunal in series of decisions, depending upon the nature of industry in which assessee’s are engaged in, had estimated the profit element to be at 12.5%. Appeal of the assessee is allowed.
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2021 (11) TMI 1115 - MADRAS HIGH COURT
Reopening of assessment u/s 147 - requirement for giving a speaking order - Notice at last date of expiry of the limitation for reopening of the assessment - sale of land and the claim of long term capital gain under the provisions of the Income Tax Act - allegation of non-disposal of objections against reopening of assessment - HELD THAT:- Perused the notices issued under Section 148 and the reasons given for reopening of the assessment and the subsequent communications which culminated in the issuance of the show cause notices and the disposal of the proceedings vide impugned assessment orders.
It is the case where there is slight irregularity in the proceedings carried out by the respondent in as much as the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd[2002 (11) TMI 7 - SUPREME COURT] was not followed. Though the requirement for giving a speaking order is pursuant to the aforesaid decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd reported in 259 ITR 119 (SC), is doubtful in the light of the change in the method of assessment under the e-assessment. Nevertheless, assessment ought not to have been carried out in a mechanical manner. Though the petitioners have also not replied to the show cause notices, the fact remains that the objections to reopening of the assessment was conveyed after issuing the show cause notices. The petitioners were also not given sufficient time. Thus, there is procedural irregularity while passing the impugned orders.
The impugned orders are set aside and the matters are remitted back to the respondent to pass orders afresh on merits.
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2021 (11) TMI 1114 - ORISSA HIGH COURT
Interim protection granted by this Court by the order dated 1st February, 2021 - last opportunity is granted to the Applicant (Petitioner) to file a representation to the Executive Engineer, Manjore Irrigation Division, Athamallik (Opposite Party No.3) and not to the tax authority.
HELD THAT:- It is made clear that if such representation is not made on or before 1st December, 2021 the interim protection granted by this Court by the order dated 1st February, 2021 will stand vacated - the time for disposal of such representation stands correspondingly be extended up to 1st March, 2022.
The application is disposed of.
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