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Income Tax - Case Laws
Showing 21 to 40 of 661 Records
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2021 (8) TMI 1369 - ITAT BANGALORE
Income deemed to accrue or arise in India - receipt from Indian customer towards sale of software would constitute royalty within the meaning of section 9(1)(vi) of the Income-tax Act and Article 12 of the DTAA between India and USA - whether the receipts from Indian customers towards annual maintenance service, implementation and consultancy services can be brought to tax as fees for technical services? - HELD THAT:- Issue in question is squarely covered in favour of the assessee by the judgment of Engineering Analysis Centre of Excellence P.Ltd. [2021 (3) TMI 138 - SUPREME COURT] wherein it was categorically held that sale of software would not constitute royalty within the provisions of section 9(1)(vi) of the I.T.Act and Article 12(4)(a) of the DTAA between India and USA.
Amounts received towards annual maintenance services, implementation and consultancy services, as stated that when the receipts on account of sale of software itself not included as royalty. Miscellaneous income on the same such as annual maintenance also cannot be brought to tax as fees for technical services.
Thus we hold that the payment received by the assessee-company towards sale of software would not constitute royalty and cannot be brought to tax. Miscellaneous receipts on account of sale of software also cannot be brought to tax as fees for technical services. Appeal filed by the assessee is allowed.
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2021 (8) TMI 1367 - ITAT MUMBAI
Income deemed to accrue or arise in India - taxability of software sale by the US entity to Indian entities - PE in India - sale of Novell Software Products as 'Royalties' on substantive basis both under the Income-tax Act as well as the India-USA DTAA - whether the receipts from sale of Novell Software Products being in the nature of business income and in the absence of Permanent Establishment ('PE') of appellant in India, the receipts from sale of Novell Software Products ought to have been considered as not taxable in India - HELD THAT:- So far as taxability of software sale by the US entity to Indian entities is concerned learned representatives fairly agree that the said issue is now covered by case of Engineering Analysis Centre of Excellence (P.) Ltd. [2021 (3) TMI 138 - SUPREME COURT].
The transactions in question were at arm’s length price, no taxability survives in the hands of the assessee. Once basic taxability under the DAPE itself comes to an end, all other issues raised in the appeal are rendered academic and infructuous. We, therefore, uphold the plea of the assessee to this extent.
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2021 (8) TMI 1365 - ITAT DELHI
Validity of reassessment proceedings u/s 147 - Addition u/s 68 - Independent application of mind v/s borrowed satisfaction - argument submitted that the reassessment proceedings in the instant case is based on borrowed satisfaction based on the conclusion drawn by Investigation Wing - HELD THAT:- When there is non-application of mind by the AO to the report of the Investigation Wing, such reassessment proceedings are not in accordance with law and such reopening proceedings have been quashed. Since, in the instant case, the AO has not applied his mind as there is non-identification of the deponents, non-mentioning of middleman if any, absence of details in the form of instrument number through which the cheques/RTGS was accepted by the assessee company, name of the bank from which the accommodation entries were provided, the name of the bank in which the accommodation entries were credited and the date of transaction etc. therefore, we are of the considered opinion that there is complete nonapplication of mind by the AO to the information received from the Investigation Wing. Therefore, in view of the decision of Meenkashi Overseas Pvt. Ltd. (2017 (5) TMI 1428 - DELHI HIGH COURT the reassessment proceedings are not in accordance with law.
We further find in the case of Sh Rajiv Agarwal [2016 (3) TMI 972 - DELHI HIGH COURT][has held that even in cases where the AO comes across certain unverified information, it is necessary for him to take further steps, make inquiries and garner further material and if such material indicates that income of an Assessee has escaped assessment, form a belief that income of the Assessee has escaped assessment. There is non-application of mind by the AO could not be said to have reason to believe as to justify reopening of assessment.
We further find in the instant case, the assessee in response to notice u/s 148 stated that return of income filed u/s 139 of the Act be treated as return of income filed in response to notice u/s 148 and also requested for supply of the copy of reasons. We find the AO after more than four months directed the assessee to e-file the return of income which was done on 13.10.2018. We find the AO thereafter issued notice dated 16.10.2018 u/s 143(2)/142(1) of the Act and supplied reasons recorded on 22.10.2018 against which the assessee submitted objection to assumption to jurisdiction on 05.11.2018 and same were disposed of by AO on 09.11.2018. From the above facts, it is evident that the AO assumed jurisdiction to make assessment by issuing notice u/s 143(2) of the Act on 16.10.2018 before supplying reason which means that the AO assumed jurisdiction before allowing assessee to file objection to assumption to jurisdiction.
We are of the considered opinion that reassessment proceeding initiated by the AO in the instant case and upheld by the learned CIT(A) is not in accordance with law. Therefore, we quash the reassessment proceeding - Decided in favour of assessee.
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2021 (8) TMI 1364 - MADRAS HIGH COURT
Validity of order passed TPO u/s 92CA(3) - non follow the earlier decision of the Tribunal in the assessee's own case - as argued though the assessee had placed reliance on the decision of the Tribunal in the assessee's own case, wherein, identical issue was considered in [2018 (5) TMI 2069 - ITAT CHENNAI] TPO did not even refer to the said decision and mechanically passed the order - HELD THAT:- TPO has passed the order, dated 30.10.2018, pertaining to Assessment Year 2015-16, wherein, certain observations have been made with regard to the Arms Length Price. Whether the said adjustment suggestion made in the order dated 30.10.2018 is sustainable on facts can very well be examined by the DRP, which has been conferred with sufficient jurisdiction in terms of Section 144-C of the Act. Therefore, in our considered view, the appellant should not bypass the said remedy. That apart, we note that, as against the order passed by the Tribunal, which was referred to by the assessee before the TPO, which according to the assessee covers the issue, the Revenue has filed a Tax Case Appeal before this Court and the said appeal has been entertained and is pending since the year 2018.
Since each of the Assessment Year is separate by itself, the assessee can very well agitate all issues before the DRP. It is true that, if identical transactions have been considered for the earlier Assessment Years or for the subsequent Assessment Years, unless there are cogent reasons for the TPO/Assessing Officer to take a different view, normally, the trend in which the assessment has been made will not be upset or a different view will not be recorded. In any event, all issues can very well be agitated by the appellant/assessee before the DRP. We find that, in the counter affidavit filed by the respondent in the writ petition, certain factual issues have been set out to sustain their contention that the decision of the Tribunal for the Assessment Year 2013-14 would not apply.
There are also other averments made touching upon the merits of the matter. The assessee has also filed a rejoinder affidavit to the counter affidavit. In the impugned order, we also find that the learned Single Bench has made certain observations or recorded the submissions of the Revenue, touching upon the merits. In our considered view, if the appellant has to avail the remedy provided under Section 144-C of the Act, before the DRP, then the Court would not be justified in making any observation touching upon the merits of the assessment and all issues should be left open.
Writ Appeal is dismissed and the order passed by the learned Single Bench is affirmed, giving liberty to the appellant/assessee to approach the DRP.
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2021 (8) TMI 1363 - MADRAS HIGH COURT
Assessment of trust - depreciation on the assets even though the cost of purchase of asset was already treated as application of income under Section 11 - HELD THAT:- Substantial question of law No.1 has to be answered against the Revenue in the light of the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax Vs. Rajasthan and Gujarati Charitable Foundation Poona [2017 (12) TMI 1067 - SUPREME COURT] wherein it was held that normal depreciation could be considered as legitimate deduction in computing real income of assessee on general principles or u/s.11 (1)(a) of the Act. Accordingly, the substantial question of law No.1 is answered against the Revenue by complying the above decision.
Construction contract as granted to the firm in which the managing trustee was a partner would tantamount to “service” as contemplated under Section 13(2)(c) - How sub-section (2) of Section 13 should be interpreted and whether there is a deemed provision? - HELD THAT:- We find from the order passed by the CIT(A) which has been confirmed by the Tribunal that there has been no discussion on such aspects, nor the Assessee raised such issue. Nevertheless the issue, being ultimately a legal issue, involves question of fact and law for the Tribunal is required to take a fresh decision considering all issues and also the effect of sub-section (2) of Section 13.
In the result, the matter is remanded to the Tribunal to decide the issue regarding whether there was a violation committed by the Assessee Trust under Section 13(1)(c) read with 13(2) and Section 13(3) of the Act in respect of building contract awarded to a firm in which managing trustee was a partner and the firm having earned profit, whether the Assessee is entitled for exemption under Section 11.
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2021 (8) TMI 1362 - ITAT BANGALORE
TP Adjustment - Comparable selection - Computation of margin of the comparable companies adopted by the TPO - HELD THAT:- On perusal of the financial, it is clear that comparable company, namely, Priya International Limited is having three segments for the relevant assessment year also. Out of the total revenue for the relevant assessment year, the sale of software/electronics is only to the tune - AO/TPO is directed to adopt the margin of Priya International Limited with regard to the segment of electronics alone.
TP adjustment by directing the TPO to re-compute the arm's length price in the case of the Appellant at entity level - HELD THAT:- Bangalore Bench of the Tribunal in the case of IKA India Private Limited [2018 (10) TMI 49 - ITAT BANGALORE] had held that as per section 92 the transfer pricing adjustment has to be made with reference to the international transactions the assessee had undertaken with its AEs.
In view of the clear directions of the Co-ordinate Bench order of the Tribunal in the case of IKA India Private Limited v. DCIT (supra) that the transfer pricing adjustment should be restricted to AEs related transaction, we direct the AO/TPO to re-compute the arm's length price of the assessee in respect of the international transaction it had entered with its AEs.
Disallowance of interest expenses - allowable business expenditure - AO erred in disallowing the interest paid on account of statutory payments - CIT(A) erred in not deleting the said disallowance - HELD THAT:- The assessee had claimed as deduction in the Profit and Loss Account, interest expenditure on account of delayed payment of statutory dues - Whether the statutory payment are routed through the Profit and Loss account or not is immaterial for deciding the issue whether interest paid for the belated payment of statutory dues is compensatory or not (if the same is compensatory, the interest expenditure is allowable deduction u/s. 37 of the I.T. Act). Mumbai Bench of the Tribunal in the case of Chander K. Raichandani [2013 (2) TMI 713 - ITAT MUMBAI] had clearly held that the simple interest paid for belated payment of statutory dues is nothing but compensatory and allowable deduction u/s. 37 - we hold that the sum paid as interest for belated payment of statutory dues is an allowable deduction.
Working capital adjustment - HELD THAT:- In terms of Rule 10B(1)(e)(iii) of the I.T. Rules, the net margin arising in comparable uncontrolled transactions should be taken into account the differences, if any, between the international transaction and the comparable uncontrolled transactions which could materially affect the amount of net profit margin in the open market. It is not the case of the TPO/DRP that differences in working capital requirements of the international transactions and the uncontrolled comparable transactions is not a difference which will materially affect the amount of net profit margin in the open market. If for reasons given by the Revenue Authorities working capital adjustment cannot be allowed to the profit margin, then the comparable uncontrolled transactions chosen for the purpose of comparison will have to be treated as not comparable in terms of Rule 10B(3) of the I.T. Rules.
Assessee in the present case has given all the details required for working capital adjustment. Therefore, the Revenue Authorities were not justified in denying the claim of the assessee for deduction. Hence, the AO/TPO is directed to allow the working capital adjustment in the light of the material placed on record, after affording a reasonable opportunity of hearing to the assessee. It is ordered accordingly.
Corporate Guarantee Commission - HELD THAT:- The corporate guarantee is an international transaction and there is no doubt that the arm's length price has to be computed with reference to the said transaction. However, in the instant case, it is the case of the assessee that amount of the subsidiary is lying with the assessee on account of advance for which no interest was being charged by the subsidiary. This factual aspect has not been examined neither by the AO/TPO nor by the DRP - We are of the view that the matter needs to be examined afresh by the AO/TPO and we remit the issue to the files of the AO/TPO. It is ordered accordingly.
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2021 (8) TMI 1361 - ITAT BANGALORE
TP adjustment - MAM selection - determination of ALP in respect of the international transaction of purchase of stock - in- trade by the Assessee from its AE - assessee aggregated and benchmarked the transactions of purchase of consumables, raw materials, stock-in-trade and capital assets by selecting Cost Plus Method (CPM) as Most Appropriate Method (`MAM') and the overseas AE as tested party - Assessee submitted that the TPO ought not to have rejected the claim of the Assessee that RPM was the MAM for determination of ALP - HELD THAT:- A method for determining arm’s length price, to be held as a ‘most appropriate method’ (MAM), should be, as provided in rule 10C(1). A method "which is best suited to the facts and circumstances of each particular transaction" and a method and "which provides the most reliable measure of arm’s length price of the international transaction" Under rule 10C(2)(c), "the availability, coverage and reliability of data necessary for application of the method" is one of the crucial factors determining suitability of a method of determination of arm’s length price in a particular fact situation.
Similarly, it is also important to determine whether accurate adjustments can be made for the differences between the international transactions and the comparable uncontrolled transactions, and unless such adjustments can be made the related method cannot be said to be most appropriate method.
Determination of ALP on the basis of facts and circumstances and as per the requirements of the relevant statutory provision is mandatory and cannot be accepted owing to default. We therefore set aside the order of the AO/TPO on the issue and the directions of the DRP on the issue and remand the issue to the DRP for passing a speaking order after meeting the specific objections raised by the Assessee. The relevant grounds of appeal being Gr.No.1 to 12 are accordingly treated as allowed for statistical purpose.
Disallowance of reimbursement of expenses by invoking the provisions of Sec.40(a)(ia) - submission of the Assessee on the aforesaid disallowance was that the reimbursements were purely on a cost to cost basis and there was no margin whatsoever and therefore there was no question of deduction of tax at source on such reimbursements - HELD THAT:- We are of the view that the DRP fell into an error in refusing to examine the plea of the assessee that the sum paid were mere reimbursement with no element of income by following the decision of Transmission Corporation AP Ltd. [1999 (8) TMI 2 - SUPREME COURT]. The said decision has been explained in a later decision in the case of GE Technologies [1999 (8) TMI 2 - SUPREME COURT] and in terms of the said judgment the chargeability of the sum paid in the hands of the recipient has to be gone into. If the payments were mere reimbursement, then there would not no income chargeable in the hands of the recipient and hence no requirement of deduction of tax at source. Since this exercise is required to be carried out by the DRP, we deem it proper to remit this issue also to the DRP.
Admission of additional ground - Assessing Officer computing total income without adjusting the declared loss - HELD THAT:- Additional grounds of appeal raise questions of law, which can be decided on the basis of material available on record. The omission to raise the aforesaid grounds of appeal is bonafide. In view of the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co Ltd [1996 (12) TMI 7 - SUPREME COURT] and Jute Corporation of India [1990 (9) TMI 6 - SUPREME COURT] and the discretion vested in your Honours under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963, the additional grounds of appeal is admitted for adjudicated on merits.
Merits of the claim made in the additional ground is concerned, the issue requires examination by the AO when he gives effect to the order. Ends of justice will be met, if the AO is directed to consider the claim of the assessee and if found correct give appropriate adjustment to the total income.
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2021 (8) TMI 1360 - ITAT MUMBAI
TP Adjustment - computation of assessee’s own PLI - As submitted foreign-AE being least complex entity, should be taken as tested party for the purpose of benchmarking - HELD THAT:- AEs were providing marketing services in overseas markets against lump-sum fees. Therefore, the selling and marketing expenses incurred in domestic segment were rightly allocated to non-AE sales by the assessee. There was no justification to allocate the same to AE segment. So far as the compensation for use of premises is concerned, we are of the opinion that this expenditure would mostly be fixed in nature and would bear no relation with the turnover. The same has to be incurred irrespective of quantum of turnover. On the other hand, if the number of employees were more, the assessee would require larger premises and the expenditure would be more. Thus, allocating the same on the basis of number of employees would be more scientific method of allocating these costs. Similar is with electricity cost. More the employees more would be such cost. Therefore, we do not concur with Ld. TPO’s approach in allocating the same on the basis of sales. The method adopted by the assessee was more scientific and supported by guidance note issued by the Institute of Cost Accountants of India for allocating administrative overheads which provide for number of employees as one of valid allocation key. Therefore, the assessee’s PLI of 21.36% & 21.53% with respect to OTI-USA & OTG-Germany was to be accepted. We order so.
Comparable selection - Assessee is engaged in providing Engineering Design Services (EDC) to its various overseas customers through its marketing arm in the form of Associated Enterprises (AE) in USA and Germany. It is evident that the AEs are remunerated at lump sum marketing-fees which were in the range of 3% to 3.5% and rest of the revenue would accrue to the assessee, thus companies functinally dissimilar with that of assessee need to be deselected.
Since the assessee’s PLI is much better than average PLI of remaining comparable entities, the transactions under consideration are to be considered at Arm’s Length Price. We order so. The impugned TP adjustments, as confirmed in the impugned order, stands deleted.
Equity investments - re-characterizing the transactions as loans / advances and make TP adjustment based on notional interest computation - HELD THAT:- Assessee was operating in USA markets through its AE i.e. OTI-USA. It has made investment in share capital in its subsidiary which is evident from foreign remittance certification, annual report and financial statement of the subsidiary. The shares have been subscribed at face value in accordance with RBI’s guidelines. The subsidiary has issued share-certificate to the assessee within a period of 60 days as mandated by RBI. The investment was made to fund the expansion plan of USA subsidiary and to strengthen its Balance Sheet which had accumulated losses. This being so, the action of lower authorities to re-characterize these transactions, in our opinion, was based more on mere allegations rather than being based on any tangible evidence on record. The assessee was holding company of its AE and any adverse working of AE would directly impact assessee’s interest. It was true that had the AE obtained the funds through loan / debt, it would have to meet interest expenses at regular interval which would have ultimately affected its profitability and would not have provided the requisite cash-flow to carry on its business swiftly. The assessee, as a holding company, had infused funds in its subsidiary with a long-term objective through equity mode so as to enable the AE to carry on its business smoothly and swiftly. The Ld. TPO failed to distinguish between loan and capital contribution by way of equity. Therefore, we do not concur with the approach / action of lower authorities in re-characterizing the transactions as loans / advances and make TP adjustment based on notional interest computation. - Therefore, considering the factual matrix, we direct Ld. AO to delete this adjustment. The ground, to that extent, stands allowed.
TP adjustment arising out of reimbursement of software expenses to OTI-USA - HELD THAT:- It could be seen that the services of M/s Orasoft has been availed by the assessee only. The AE has merely carried out the transactions on behalf of the assessee. The payment made by the assessee was in the nature of reimbursement of third-party payments. There is nothing on record which would show that AE has been paid extra remuneration, in any way, for the said purpose. To summarize, the transactions are duly evidenced by agreement, invoices raised by M/s Orasoft and consequent debit note raised by AE on the assessee. The only doubt raised by Ld. TPO is tangible evidence with respect to receipt of services.
TPO has also doubted the genuineness of the invoices. However, there are no concrete findings or material which would justify rejection of assessee’s explanation and documentary evidences. The Ld. CIT(A) also erred in rejecting these documentary evidences without any sound basis. Therefore, not concurring with the approach of lower authorities, we direct for deletion of this adjustment.
TP adjustment on account of Share Application Money - As there was end-to-end billing by OTI-USA to assessee’s customers vis-à-vis amount billed by assessee to OTI-USA. The aforesaid fact remains uncontroverted before us also. This being the case, no benefit arose to assessee’s AE and therefore, there would be no question of computing ALP of the same. Concurring with the conclusion of Ld. DRP, we dismiss Ground Nos. 1 & 2 of revenue’s appeal.
Margin of 5% as retained by OTG-Germany - We find that percentage of revenue earned from this entity is merely 1.71% of total revenue earned by the assessee. The margin retained by this entity was quite less than mean margin of 8.89% reflected by comparable entities as selected by the assessee in its TP study report (though we do not accept foreign AE as tested party as held in AY 2008-09). Nevertheless, the assessee’s segmental PLI of 45.57% was much above the mean margin of comparable entities selected by Ld. TPO. Therefore, no fault could be found in the approach of Ld. DRP.
Computation of notional interest on Share Application money - We find that factual matrix is similar as in AY 2008-09. Therefore, our adjudication as for AY 2008-09 would apply here also. Taking the same view, we would hold that re-characterization of these transactions as loans / advances was not justified and accordingly, we delete the adjustment as made by lower authorities. Ground No.3 of revenue’s appeal stand dismissed whereas Ground No.1 of assessee’s appeal stands allowed.
Deduction of late payment of employees’ PF and ESIC - HELD THAT:- We find that the assessee has deposited an amount of Rs.81.21 Lacs as employee’s contribution to PF and ESIC of Rs.0.08 Lacs. The payment was made after due date as specified under the respective acts but before the due date of filing of return of income - this issue is covered in assessee’s favor by the decision of this Tribunal in assessee’s own case for AY 2006-07 [2013 (6) TMI 209 - ITAT MUMBAI] Therefore, respectfully following the same, we direct Ld.AO to allow the deduction of the same to the assessee. This ground stand allowed.
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2021 (8) TMI 1359 - ITAT BANGALORE
TP adjustment on brand royalty computed by authorities below - HELD THAT:- As per the aforesaid provisions, consideration for transfer of rights (including granting of a licence) in respect of a trade mark or similar property or for use of a trademark or transfer of rights (including granting of a licence) in respect of any copyright, literary, artistic or scientific work, falls under the definition of ‘Royalty’ under the IT Act.
The revenue has not been able to produce any agreement to establish the payment of royalty by the associated enterprises to assessee. It is also not been established that by the use of brand “Sasken” the subsidiary associated enterprises were able to get premium price which could be ultimately translate into profits to pay royalty.
Admittedly, in the present facts of the case, assessee has registered the trademark at all the jurisdiction where the subsidiaries are located. It is also not brought on record that assessee has incurred any expenditure or contributed any money for establishment of its name in the geographical areas that benefited the associated enterprises.
Based on the above, we cannot uphold 2% royalty computed on the turnover of the AE’s by the Ld.AO/TPO.
We remand this issue back to the Ld.TPO for fresh consideration - TPO shall carry out necessary verification based on the which it must first be determined whether there is any Royalty that could be attributed. In the event Royalty is to be attributed, proper benchmarking needs to carried out the accordance with section 92CA of the Act, by selecting an authorised method and comparables. We place reliance on BEPS action plan reproduced herein above. Needless to say that proper opportunity of being heard must be granted to assessee.
Benchmarking of the international transaction between the assessee and Sasken Inc. - HELD THAT:- There is no document to show the risk assumed or that assessee had anything to do beyond mediating between Sasken Inc., and GE Ultrasound Ltd. We note that the observations of authorities below that the contract is coming because of numerous intangibles and that assessee has contributed to the intangibles along with Sasken Inc., is all assumptions in thin air without any basis. On these facts, the Ld.TPO used PSM without there being any discussion about the comparables chosen and whether they were acceptable or not to the assessee. Such action by Ld.TPO cannot be approved as it is not in accordance with the Rule 10(1)(d) of Income-tax Rules. We therefore remand this issue back to the Ld.AO/TPO for carrying out the benchmarking of the international transaction between the assessee and Sasken Inc., in accordance with law to determine if the price changed by assessee to be a facilitator is at arms length.
Disallowance of deduction u/s 10 AA - We direct the Ld. AO to compute deduction under section 10 AA of the act in accordance with the ratio laid down by Hon’ble Supreme Court in case of Yokogawa India Ltd. [2016 (12) TMI 881 - SUPREME COURT]
Disallowances made u/s 14A and MAT credit not granted in respect of taxes paid outside India under section 90/90A - HELD THAT:- AO has not considered the submissions of assessee before computing the disallowance in the hands of assessee on these issues alleged. Accordingly we deem it fit and proper to remand this issue back to the AO. AO is directed to verify all the details filed by assessee and to consider the claim in accordance with law.
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2021 (8) TMI 1358 - ITAT BANGALORE
TP Adjustment - comparable selection - HELD THAT:- Acropetal Technologies has been held to be into products and that RPT is at 18.66% which is beyond the marginal limit of 15% for year under consideration, by this Tribunal, in case of Electronics for Imaging India Pvt.Ltd for assessment year 2011-12 [2017 (7) TMI 1335 - ITAT BANGALORE] We therefore do not find any this comparables to be functionally similar with assessee.
E- Infochips Ltd. does not satisfy service income filter being 75%. We therefore, do not see any reason to set aside this company to Ld.TPO. Therefore, respectfully following view taken by coordinate bench of this Tribunal in DCIT vs M/s CGI Information Systems and Management Consultations Pvt.Ltd. [2018 (4) TMI 567 - ITAT BANGALORE] we direct Ld. TPO to exclude this company.
ICRA Techno Analytics Ltd., E-Zhest Solutions Ltd have been consistently excluded by this Tribunal in case of a captive service provider like assessee. CIT.DR could not establish anything contrary to observations of this Tribunal reproduced hereinabove. Respectfully following aforestated view, we do not find any infirmity in exclusion of these comparables by DRP.
Addition in respect of advertisement expenses - re-allocation of expenses from the Non-STPI unit to the STPI units - HELD THAT:- As Tribunal, in assessee's own case for AY 2009-10 [2015 (8) TMI 1447 - ITAT BANGALORE] deleted identical addition made on account of re-allocation of expenses from the Non-STPI to the STPI unit as they wew made without any basis. Revenue has not been able to establish any factual difference in the year under consideration with that of AY 2009-10. Respectfully following the same we do not find any infirmity in the view taken by the Ld.CIT(A).
Deduction u/s 10A - reducing the expenditure incurred in travel, telecommunicaiton etc. from export turnover and toatl turnover for compulting deduction - HELD THAT:- Admitedly this issue stands settled by Hon’ble Supreme Court in case of HCL Technologies Ltd. [2018 (5) TMI 357 - SUPREME COURT] Respectfully following the same, we do nto find any infirmtiy in the view taken by Ld.CIT(A). Accordingly this ground raised by revenue stands dismissed.
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2021 (8) TMI 1357 - ITAT RAIPUR
Exemption u/s 11 - treating unutilized amount of grant received from “Essar Limited” - claim towards actual application of income in the immediately next financial year - HELD THAT:- We find that the law permits availability of deduction u/s 11(1) of the Act where the assessee has successfully demonstrated the application of income in the immediately subsequent financial year. Inconsistency in taking shelter of either Section 11(1) or Section 11(2) of the Act, in our view, is not fatal for the purposes of granting tax relief to a charitable trust engaged in benefit of public at large.
The substantial compliance of the conditions laid down in the respective provision is of overriding importance. The assessee, in the instant case, claimed that, on facts, it has complied with the provisions of Section 11(1) of the Act read with Explanation (1)(1)(b) thereto towards utilization of CSR money received and thus entitled to tax benefits available to the charitable trust.
We observe that the claim towards actual application of income in the immediately next financial year is a question of fact. The aforesaid fact thus requires suitable examination at the end of the AO to enable him to form a view on entitlement of tax benefits u/s 11 of the Act in accordance with law and in terms of observations made hereinabove.
We accordingly consider it expedient to set aside the first appellate order and restore the issue back to the file of the AO to ascertain actual utilization of donation/income received from Essar Steel Ltd. for charitable purposes in immediately next financial year in terms with Explanation 1(b) to Section 11(1) of the Act. In the event, where the AO finds to his satisfaction that the amount has been utilized in the next financial year as pleaded, he shall grant the deduction to the assessee as claimed in accordance with law. Needless to say, proper opportunity shall be granted to the assessee to ascertain the relevant facts and the AO shall pass speaking order.
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2021 (8) TMI 1356 - KARNATAKA HIGH COURT
Recovery proceedings - provisional attachment order - fixed deposit of the petitioners have been attached by respondent No. 1 by passing provisional order of attachment invoking section 281B(1) - HELD THAT:- Applying the principles laid down in Radha Krishan's case (2021 (4) TMI 837 - SUPREME COURT] to the facts of the instant case, a perusal of the impugned provisional attachment order will clearly indicate that except for merely stating that since there is a likelihood of huge tax payments to be raised on completion of assessment and that for the purpose of protecting the Revenue, it is necessary to provisionally attach the fixed deposit of the petitioners, the other mandatory requirements and precondition as laid down by the apex court have neither been complied with nor fulfilled or followed prior to passing the impugned order. It is apparent that the impugned provisional attachment orders at annexures D and D1 do not satisfy the legal requirements as laid down in Radha Krishan's case (supra) and consequently, in view of the fact that the impugned provisional orders are cryptic, unreasoned, non-speaking and laconic, the same deserve to be quashed.
In so far as the apprehension of the respondents that in the event huge tax payments are to be raised as against the petitioner-assessees, the assessee may not make payment of the same causing loss to the Revenue is concerned, in the light of the undisputed fact that the proceedings under section 153A of the said Act of 1961 have already been initiated coupled with the fact that section 281 of the said Act of 1961, contemplates that any alienation of any property belonging to the petitioners would be null and void, in addition to the specific assertion made by the petitioner that they own and possess immovable property to the tune of more than Rs. 300 crores, the said apprehension of the respondents is clearly unfounded and without any basis and consequently the said apprehension of the respondents cannot be accepted.The petition is allowed.
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2021 (8) TMI 1355 - ITAT MUMBAI
Taxability of shipping income - Income deemed to accrue or arise in India - Income being 7.5% of total freight collections derived from operation of ships in international traffic - business connection or Permanent Establishment (PE) of the Appellant in India - benefit of Article 8 of the Double Taxation Avoidance Agreement between India and UAE (Tax Treaty) - whether benefit of article 8 can be declined in respect of freight collections earned from cargo/containers loaded on slot of other vessels that the OEL, FZCO was entitled to under the joint business/pooling arrangements? - HELD THAT:- DRP fairly accepts the issue is covered, in favour of the assessee, by Hon’ble jurisdictional High Court’s judgement in the case of Balaji Shipping [2012 (8) TMI 681 - BOMBAY HIGH COURT]. The mere fact that an appeal against the said judgement is pending before Hon’ble Supreme Court does not dilate the binding nature of this precedent.
Once Hon’ble jurisdictional High Court takes a view, we are bound to follow the same-in letter and in spirit. Respectfully following the same, we uphold the plea, of the assessee and direct that benefit of article 8 must be extended to entire freight receipts-irrespective of whether the earnings are relating to feeder vessels or by the ships in international traffic. The assessee gets the relief accordingly.
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2021 (8) TMI 1354 - ITAT MUMBAI
Disallowance of interest u/s. 57 (iii) - proportionately disallowing interest on borrowing invoked alleging that entire borrowed funds were not utilized for the purpose of investment in partnership concerns - under the arbitration settlement with the partners, the assessee had to accept rights in respect of three flats in an under construction project at a somewhat high value - HELD THAT:- As rightly held by the assessee in respect of three flats, which are valued by the arbitrator at Rs. 3.25 crores, cannot be considered in isolation with assessee’s investment in the firm. The investment made by the assessee in the firm, to that extent, remains in existence-through in a different form because of the compulsion of a binding arbitration award rather than choice of the assessee. In this view of the matter, the disallowance is devoid of legally sustainable and factually correct basis. Therefore, direct the Assessing Officer to delete the impugned disallowance
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2021 (8) TMI 1349 - ITAT BANGALORE
TP adjustment - comparable selection in the ITeS segment - HELD THAT:- As far as exclusion of Infosys Ltd., is concerned, the decision of the ITAT Hyderabad Bench [2018 (6) TMI 505 - ITAT HYDERABAD] cited by the learned Counsel for assessee supports the pela for exclusion. Hence, we direct exclusion of Infosys Ltd., as a comparable company.
As far as exclusion of Cross Domain Solutions Pvt. Ltd., we notice that this company renders diversified Knowledge Process Outsourcing (KPO) providing services in insurance, health care, HR and accounting domains. In the decision cited by the learned DR, the assessee was also in KPO services of providing engineering design services. The assessee in this appeal is a Business Processing Outsourcing Services which are routine in nature and not in the nature of a knowledge process outsourcing. Therefore we prefer to follow the decision cited by the assessee and direct exclusion of Cross Domain Solutions Pvt. Ltd.
Non-grant of working capital adjustment while arriving at the average arithmetic profit margin of comparable companies - In the case of the Assessee in this appeal, neither the TPO nor the DRP have gone into the quantum of adjustment that is to be given towards working of working capital adjustment, we are of the view that it would be just and appropriate to remand the issue of granting of working capital adjustment to the TPO/AO for fresh consideration in accordance with law after due opportunity of being afforded to the Assessee. We hold and direct accordingly.
Claim towards payment of leave encashment - HELD THAT:- In the light of the decision of the Hon’ble Supreme Court in the case of Exide Industries [2020 (4) TMI 792 - SUPREME COURT] the assessee will not be entitled to claim deduction on leave encashment on the basis of the provision. Taking into consideration the circumstances under which the assessee did not claim a sum being leave encashment actually being paid during the previous year relevant to Assessment Year 2014-15 we are of the view that the assessee should be allowed leave encashment actually paid as per provisions of section 43B(f) of the Act. We remit the issue to the AO to verify the claim of the assessee and allow deduction to the assessee as per law after affording assessee opportunity of being heard.
Deduction in respect of Education Cess and Secondary and High Education Cess on Income Tax - HELD THAT:- We have considered the submissions and we find that in the case of Sesagoa Ltd. [2020 (3) TMI 347 - BOMBAY HIGH COURT] held the expression 'cess' used in section 40(a)(ii) of the Act ought not to be read or included in expression 'any rate or tax levied' as appearing in section 40(a)(ii) and consequently, 'cess' whenever paid in relation to business, is allowable as deductible expenditure. Following the aforesaid decision, we uphold the claim of the assessee for deduction of the aforesaid sum.
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2021 (8) TMI 1345 - ITAT MUMBAI
Benefit of Vivad Se Vishwas Scheme, 2020 - HELD THAT:- As submitted by assessee, after re-evaluating the decision whether to opt for Vivad Se Vishwas Scheme, 2020, the assessee ultimately decided against it and preferred to pursue the appeal.
In view of the fact that the assessee has decided against availing the benefit of the Vivad Se Vishwas Scheme, 2020 and wants to pursue the present appeal, we are inclined to recall the order [2020 (12) TMI 1352 - ITAT MUMBAI] and restore the appeal to its original position. Registry is directed to fix the appeal for hearing in due course before the assigned Bench. Fresh date of hearing of the appeal should be intimated to both the parties.
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2021 (8) TMI 1343 - DELHI HIGH COURT
Validity of Faceless Assessment - Necessity of issuance of a prior show cause notice and draft assessment order before issuing the final assessment order - HELD THAT:- Since in the present case no prior Show Cause Notice as well as draft assessment order had been issued before passing the impugned assessment order, there is a blatant violation of principles of natural justice as well as mandatory procedure prescribed in “Faceless Assessment Scheme” and as stipulated in Section 144B of the Act.
Keeping in view the aforesaid facts, the impugned assessment order, notice of demand and notice of penalty dated 19th April, 2021 for the Assessment Year 2018-19 are set aside and the matter is remanded back to the Assessing Officer, who shall issue a draft assessment order and thereafter pass a reasoned order in accordance with law
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2021 (8) TMI 1342 - KERALA HIGH COURT
Addition u/s 32(1)(iia) read with the second proviso - left over additional depreciation brought forward from immediately preceding assessment year - HELD THAT:- The identical issue in the case of assessee herein has already been considered by this Court in [2021 (8) TMI 1341 - KERALA HIGH COURT] and decided in favour of the assessee and against the revenue. Hence Question No.1 is answered in favour of the assessee and against the revenue.
Deduction u/s 80-IA - Whether DG Power Generation Units constituted an "undertaking" for the purpose of deduction? - HELD THAT:- The identical issue in the case of assessee herein has already been considered by this Court in [2021 (7) TMI 1387 - KERALA HIGH COURT] and decided in favour of the assessee and against the revenue. Hence Question No.3 is answered in favour of the assessee and against the revenue.
Addition made u/s.36(1) (va) r.w.s.2(24)(x) in respect of belated payment of employees' contribution to PF - HELD THAT:- The identical issue has already been considered by this Court in [2019 (4) TMI 370 - KERALA HIGH COURT] and answered in favour of the revenue and against the assessee. Hence Question No.4 is answered in favour of the revenue and against the assessee.
Weighted deduction under Section 35(2AB) in respect of the salary paid on outdoor R & D facility - question refers to salary paid at an outdoor R&D facility and the payment is without qualification of the DSIR - HELD THAT:- The question does not refer to the circumstances considered and accepted by the DRP while appreciating the claim of expenditure to accept the salary paid by the assessee company to Mr.Peter Becker, an employee of subsidiary of the assessee as an allowable expenditure. The assessee demonstrated the utilisation of services and once the salary paid to Mr.Peter Becker is accepted as expenditure, the reason to disallow weighted deduction is completely wanting. The department could not before the Tribunal demonstrate that the expenditure accepted in respect of Mr.Peter Becker is untenable in fact. The services are stated to have been taken and remuneration paid to the employee in the field, section accords weighted deduction as additional deduction.
The findings of fact recorded by the DRP and the Tribunal are available in the circumstances of the case, we are convinced that the question framed is without merit. Hence question is answered in favour of assessee and against the revenue.
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2021 (8) TMI 1341 - KERALA HIGH COURT
Additional depreciation allowed u/s 32(1)(iia) - HELD THAT:- It is not in dispute and the fact that the assessee at the first instance availed 50% of additional depreciation allowed u/s 32(1)(iia) - assessee could avail 50% of the allowed depreciation on account of the fact that the equipment for which depreciation was claimed was not used was not used for more than 180 days in the previous year 2006-07. Thus, the assessee claimed 10% of permissible 20% depreciation in the previous year 2006-07 and claimed balance 50%, i.e., 10% of 20%, in the Assessment Year 2007-08. The Tribunal held that there is no restriction in the Income Tax Act that balance of one-time-incentive in the form of additional sum of depreciation cannot be availed in the subsequent year.
Assessee refers to and relies on the judgments T P Textiles (P) Ltd. [2017 (3) TMI 739 - MADRAS HIGH COURT] and Rittal India (P) Ltd [2016 (1) TMI 81 - KARNATAKA HIGH COURT] for sustaining the view taken by the Tribunal. Also argued that the clarificatory amendment made to Section 32(1)(ii) with effect from 01.10.2016 supports the deduction claimed by the assessee. The amendment, no doubt, was introduced with effect from 01.10.2016, is a clarificatory amendment. The decisions relied on by the assessee are directly on the point and we are in full agreement with the view taken by the Madras and Karnataka High Courts. The propositions stated in the reported judgment applies in all fours. By following the reasons and principles laid down in T P Textiles (P) Ltd. and Rittal India (P) Ltd (supra), question nos.1 and 2 are answered against the Revenue and in favour of the assessee.
Disallowing the balance investment of the Appellant in Gujarat Perstop Electronics Ltd. (GPEL) - HELD THAT:- The reframed question has bearing on the view expressed by this Court on a similar question stated in the Assessment Year 2002-03 and the judgment is reported in Commissioner of Income-Tax v. Apollo Tyres Ltd. [2019 (12) TMI 375 - KERALA HIGH COURT] Point no.3 in the reported judgment deals with these aspects of the matter and by following the judgment in Apollo Tyres Ltd (supra), the question is answered in favour of the assessee and against the Revenue.
Deduction u/s 80IA - Whether DG Power Generation Units 1 and II constituted an "undertaking" under Sec. 80IA - HELD THAT:- As a matter of fact, that the questions raised in this appeal, namely question nos.4 and 5 are similar to the questions raised by the Revenue for the Assessment Year 2002-03 [2019 (3) TMI 1549 - KERALA HIGH COURT] the appeals filed by the Revenue were dismissed. Our attention has been drawn to the reasoning and conclusion recorded by this Court on similar questions framed in [2019 (3) TMI 1549 - KERALA HIGH COURT] - the substantial questions of law raised as question nos.4 and 5 are answered in favour of the assessee and against the Revenue.
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2021 (8) TMI 1336 - ITAT AMRITSAR
Validity of assessment u/s 153A - Requirement of prior approval of the Joint Commissioner u/s 153D - Whether CIT(A) has erred in law by upholding the alleged approval u/s 153D being illegal, bad in law and without any application of mind and the Assessment order is passed without obtaining requisite approval? - HELD THAT:- As approval was received in the office of the Assessing Officer on 28.7.2016, whereas the Assessment Order was passed by the AO on 27.7.2016. In the remand report, the Assessing Officer had submitted that in the era of technology where communication between the persons via phone /fax, date of receipt of physical letter by post is immaterial. In our considered opinion, the requirement of Section 153D is clear and unambiguous, which requires prior approval of the Addl. CIT before passing the order by the Assessing Officer.
Prior approval as contemplated u/s 153D cannot be granted over the phone, sometimes the approving agency may not agree in the complete draft order and suggest some modification, changes or deletion in the draft assessment orders. At times, the approving agency may also suggest the assessing officer to consider some material which has been missed by the assessing officer, for consideration and incorporating in the proposed assessment order. All the above said cannot be conveyed over the telephone. There has to be some written more for conveying the approval either by fax/ email/ letter after due deliberation or consideration of the relevant material and draft assessment order. In no case, oral approval can be granted by the Addl. CIT. The order granting the approval can be subject matter of judicial review if it is passed without application of mind, without assigning the reason or non-consideration of the relevant material or passing the order considering the irrelevant or extraneous material or reason.
As the Assessing Officer has passed the assessment order without having the approval in his record, in our considered opinion, the assessment order passed in all the cases before us is null and void and cannot be acted upon. In view of the above, all the appeals from the assessee are required to be allowed.
When the Assessment Order was passed by the Assessing Officer, than there was no prior approval in the record of the Assessing Officer, from the Addl. CIT. Further, the approval granted after passing of the order was non-est in the eyes of law as it was granted in the mechanical, stereotype manner, without assigning any reasons and without considering the draft assessment order and the assessment record. Appeal of assessee allowed.
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