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2021 (12) TMI 1409 - GUJARAT HIGH COURT
Reopening of assessment u/s 147 - assumption of jurisdiction itself is bad in law - reopening as beyond a period of four years - HELD THAT:- This is purely a question of law which arises for consideration as the reopening is beyond a period of four years and the reasons recorded do not, in any manner, say that there was anything that had been done on the part of the petitioner – assessee which has led to the income escaping the assessment. In absence of failure disclosed fully and truly all material facts, any reopening beyond a period of four years from the end of the assessment year 2014-15 is unsustainable. There is no whisper of the failure of the part of the petitioner of the true and full disclosure in the reasons which have been furnished and therefore, the petitioner has to be considered as a victim and with that being clear in the mind of the revenue also, this notice has been issued, and hence, this requires indulgence.
The present petition stands disposed of as withdrawn.
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2021 (12) TMI 1407 - RAJASTHAN HIGH COURT
Allowable Revenue expenses u/s 37 - Business loss on account of permanent diminution in the value of the investment made in the equity shares in one of the subsidiaries of the assessee in USA - According to the AO this loss was not allowable u/s 37 since the expenditure could not have been considered as a revenue expenditure - HELD THAT:- Tribunal relying on the decisions of the Supreme Court and High Courts noted that under similar circumstances the expenditure incurred by the company were allowed. This was on the basis that the assessee company in order to expand its business world wide had setup subsidiaries in other countries. The investment made in such companies was seen as revenue expenditure since the purpose behind making the investment was only for expansion of the business. Applying this logic to the assessee in the present case, the Tribunal was of the opinion that such investment being in the nature of revenue expenditure was to be allowed under Section 37 of the Act.
Having perused the order passed by the AO and by the tribunal and having heard learned counsel for the revenue, we find no error in the view expressed by the tribunal. As noted, the assessee had made investment in its subsidiary company in order to expand its business with a view to earn higher profit. The investment was thus driven by business expediency. The tribunal therefore committed no error - No question of law arises.
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2021 (12) TMI 1406 - ITAT AHMEDABAD
Bogus LTCG - Addition u/s 68 - penny stock purchases - exemption u/s 10(38) denied - CIT-A deleted the addition - HELD THAT:- After due consideration of the findings of the learned CIT(A), we do not find any error in it. The shares were purchased long back in 2000-2001 and sold after retaining them for more than 10 years. There is nothing with the Assessing Officer to treat it as a bogus investment to earn profit in a short span of time. Therefore, the appeal of the Revenue is devoid of any merit and, accordingly, it is dismissed.
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2021 (12) TMI 1403 - ITAT BANGALORE
TP Adjustment - comparable selection - functional dissimilarity - HELD THAT:- As assessee in engaged in the business of provision of Software Development Services (SWD services) and in development, design and implementation of software programmes. Assessee also acts as consultant on matters relating to IT enabled services to its wholly owned holding company, thus companies functionally dissimilar with that of assessee need to deselected .
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2021 (12) TMI 1400 - CALCUTTA HIGH COURT
Deduction of marketed-to-market loss - unexpired/unmatured for forex derivative contracts - Whether instruction given by CBDT dated 23.03.2010 can have a retrospective effect thereby negativity the effect of the judgement? - AO held that fees receivable in foreign exchange have been duly hedged by way of taking forward contract and such loss claimed by the assessee is a notional loss and contingent in nature - mercantile system of accounting on regular basis and the loss was recognised in its books of accounts, which is deductible under Section 37[1] - HELD THAT:- As on perusal of the circular, we find that it is not a possible direction by the Board to the AO rather Board under law cannot issue any such possible direction as the settled legal principle. AO is an independent authority and none can dictate him as to how and in what manner he is to complete the assessment. Conscious of this legal position, the Board in the instruction dated 23.3.2010 had stated that the Assessing Officer may follow the guidelines given in the said instruction. This is one more indication to say that the Assessing Officer is not bound over the instruction given by the Board.
Thus, the only contention of the revenue appears to be based upon instruction issued by the CBDT which cannot override a decision of the Hon’ble Supreme Court. Therefore, we are of the considered view that there is no error in the order passed by the Tribunal. That apart, it is rather doubtful as to whether such instruction given by CBDT dated 23.03.2010 can have a retrospective effect thereby negativity the effect of the judgement.
Respondent pointed out that identical issue was considered in the case of Principal Commissioner of Income Tax vs. Suzlon Energy Ltd. [2018 (2) TMI 1789 - GUJARAT HIGH COURT] and the Court held that the decision of the Tribunal in so far as deleting the disallowance being notional loss on outstanding foreign derivative contracts was approved by holding that the decision is in-conformity with the decision of the Hon’ble Supreme Court in Woodward Governor India [P] Ltd. & Ors. [2009 (4) TMI 4 - SUPREME COURT]. The revenue had filed a Special Leave Petition in Special Leave which was dismissed by order [2020 (1) TMI 1505 - SC ORDER] dated 17.01.2020. In the case of the same assessee, namely Suzlon Energy Limited, the Hon’ble Supreme Court in Principal Commissioner of Income Tax vs. Suzlon Energy Ltd. [2020 (2) TMI 1559 - SC ORDER] approved the decision of the High Court upholding the order of the Tribunal allowing the assessee’s claim of foreign exchange fluctuation loss on mark to market basis.
We find no grounds to interfere with the order passed by the Tribunal. Decided against the revenue.
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2021 (12) TMI 1399 - KARNATAKA HIGH COURT
Revision u/s 263 - Section 115JB of the Act applicability with respect to the disallowance u/s 14A - Tribunal held that Section 14A disallowance amount cannot be added to assessee's income for the purpose of computation of income under Section 115JB relying upon the decision of Vireet Investment (P) Ltd. [2017 (6) TMI 1124 - ITAT DELHI] and also holding that issue of debatable and as such the CIT ought not to have taken up for revision under Section 263 - HELD THAT:- As Respondent submits that the issue, in as much as Section 115JB of the Act whether applicable with respect to the disallowance under Section 14A of the Act, is already covered on merits and as such examining the question whether CIT (Appeals) had jurisdiction to invoke Section 263 of the Act would render academic. No substantial question of law arises.
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2021 (12) TMI 1398 - ITAT BANGALORE
Reopening of assessment u/s 147 OR 153C r.w.s. 153A - additional grounds - As argued no failure on the part of the assessee to disclose fully and truly necessary facts for completion of the assessment - HELD THAT:- The assessee has raised additional grounds for both the assessment years. The issue raised in the additional grounds is that the assessment completed u/.s 147 r.w.s. 143 of the Act is bad in law. The contention of the assessee is that there was a search in the premises of M/s.Davanam Jewellers Private Limited and during the course of search, there were certain material found pertaining to the assessee. Assessment orders for A.Y. 2006-2007 and A.Y. 2007-2008 ought to have been completed u/s 153C r.w.s. 153A of the Act and not u/s 147 r.w.s. 143(3) of the Act
The issue raised in the additional grounds, namely, whether the assessment is to be completed u/s 147 or 153C of the Act has not been raised before the Income Tax Authorities. The issue raised in additional grounds is a jurisdictional issue, which goes to the root of the matter.
Therefore, in the interests of justice and equity, we deem it appropriate, the same needs to be adjudicated first by the Income Tax Authorities. Accordingly, we restore the issue raised in the additional grounds to the files of CIT(A). At this point, we refrain from adjudicating the issue on merits. In the event, the CIT(A) decide the issue raised in additional grounds against the assessee, needless to state that the assessee is at liberty to file a fresh appeal raising all the issues raised in the original grounds and the additional grounds.
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2021 (12) TMI 1397 - KERALA HIGH COURT
Late filing fee u/s 234E - default in furnishing statements - Intimation u/s 200A - HELD THAT:- Learned counsel for the petitioner brought to my attention the decision in M/s.Sarala Memorial Hospital v. Union of India and Another [2018 (12) TMI 1818 - KERALA HIGH COURT] wherein an identical question arose for consideration. After considering the statutory provisions and the implications of the amendment brought into the Act, it was held that the amendment would take effect only from 1st June, 2015 and is thus prospective in nature. It is submitted that the aforesaid judgment has become final and is binding upon the authorities.
The demand for late fees for the period till the first quarter of the assessment year 2015-16 is without authority. The demand in Ext.P1 to Ext.P15 intimations for the period from 2012-13 to the first quarter of assessment year 2015-16 is bereft of authority and cannot be legally sustainable.
Accordingly, we quash Ext.P1 to Ext.P15 intimations to the extent it demands late fee under section 234E for the period from 2011-12 till 01.06.2015.
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2021 (12) TMI 1394 - ITAT HYDERABAD
Assessment u/s 153C - HELD THAT:- An assessment is valid even in absence of the foregoing incriminating material. Their lordships rather observe that whilst framing an assessment u/s 153A / 153C, AO is nowhere barred from taking cognizance of any other material as well.
Whether the assessee’s return(s) in issue would be treated as invalid being belated ones or not ? - Our reply is negative in assessee’s favour and against the department. This is because of the fact that the assessee had filed its return(s) under the Income Declaration Scheme, 2016 on 04.08.2016 followed by the search in issue dt.04.07.2017. Revenue’s argument that it had not filed any return in the corresponding assessment year u/s 139(1) we are of the opinion that the decision as to whether the income sought to be added as under the head “undisclosed income” has to be seen on the date of search only which purely stands satisfied in the facts of instant appeal. We further wish to observe here that the assessee’s returns filed under 2016 scheme stands stood duly accepted as there is no ground in Revenue’s pleadings to the contrary.
CIT-DR lastly contended that the assessee had not disclosed its IDBI bank account in the computation corresponding to the alleged returns filed in the year 2016 - We find no substances in the instant last argument as well since a perusal of the corresponding account documents indicate that the same had been opened only on 05.08.2016 and therefore, it could not be treated as an undisclosed bank account in assessment years 2010-11 to 2016-17 to say the least. So far as the last A.Y. 2017-18 is concerned, it is made clear that the relevant proceedings therein are in the search year itself only. We therefore decline the Revenue’s foregoing arguments in light of all the relevant facts and circumstances forming part of record before us. Revenue’s five appeals seeking to reverse the CIT(A)’s identical action quashing the impugned section 153C assessments fail accordingly.
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2021 (12) TMI 1391 - ITAT CHENNAI
Disallowance of interest on belated payment of non compete fees - CIT-A deleted the addition - as per AO CIT(A) erred in deleting disallowance of interest paid on non-compete fees without appreciating the fact that said expenditure is capital in nature and not to be allowed as revenue expenditure by specific legislative mandate vide section 28(va) - HELD THAT:- We find that the Ld. CIT(A) has deleted additions made by the AO towards disallowance of interest paid on belated payment of non-compete fees by following the decision of ITAT, Chennai Benches in assessee’s own case for assessment year 2000-01 where it was clearly held that liability to pay interest was contractual obligation and thus, the same is allowable expenditure u/s. 37(1) of the Act. The fact remains unchanged. The Revenue fails to bring on record any contrary judgments to counter findings of the Ld. CIT(A). Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the Revenue.
Disallowance of sales promotion expenses - assessee has claimed deferred revenue expenditure being 1/5th of total expenditure incurred for marketing expenses for product launch - AO has disallowed deferred revenue expenditure on the ground that, except as provided for amortization of expenses u/s. 35D, 35DD etc, no deduction can be allowed to other expenses - HELD THAT:- CIT(A) has allowed deduction claimed by the assessee towards expenditure incurred in the impugned assessment year by holding that once it has admitted fact that expenditure has been wholly and exclusively incurred for the purpose of business, then the same needs to be allowed as deduction as and when such expenditure has been incurred for the purpose of business. To this extent, we do not find any infirmity in the findings recorded by the Ld. CIT(A).
As regard the ground taken by the Revenue in light of the decision in the case of Goetz India Ltd. [2006 (3) TMI 75 - SUPREME COURT] we are of the considered view that restrictions imposed by the Hon’ble Supreme Court on the powers of Assessing Officer does not extend to the powers of appellant authority. The appellant authority itself entitles to admit any new claim even though such claim was not made before the AO by filing revised return of income. Therefore, we are of the considered view that there is no error in the reasons given by the ld. CIT(A) to entertain fresh claim made by the assessee in so far as deduction of total expenditure incurred for sales promotion activities. For all these reasons, we do not find any reason to interfere with the findings recorded by the Ld. CIT(A) and hence, we reject ground taken by the Revenue.
Computation of deduction u/s. 80HHC - Exclusion of excise duty/sales tax from total turnover for the purpose of computation of deduction u/s. 80HHC - HELD THAT:- We find that the Hon’ble Supreme Court in the case of Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] had considered an identical issue and held that excise duty/sales tax are not included in total turnover in the formula contended in section 80HHC(3) - CIT(A) after considering relevant facts and also by following the ratio laid down by the Hon’ble Supreme Court has directed the AO to exclude excise duty/sales tax from total turnover for computation of deduction u/s. 80HHC. The fact remains unchanged. The Revenue fails to bring on record any contrary judgments to support its arguments. Therefore, we are inclined to uphold the findings of the Ld. CIT(A) and reject ground taken by the Revenue.
Exclusion of DEPB license fees received from Government of India for computation of deduction u/s. 80HHC - HELD THAT:- We find that the issue is squarely covered in favour of the assessee by the decision of the Hon’ble Supreme Court in the case of Topman Exports vs CIT [2012 (2) TMI 100 - SUPREME COURT] where the Hon’ble Supreme Court clearly held that profit from transfer of DEPB license is entitled for deduction u/s. 80HHC - CIT(A) after considering relevant facts, and also by following the decision in the said case has directed the AO to recompute deduction u/s. 80HHC of the Act by considering profit from sale of DEPB license. We do not find any error or infirmity in the order of the Ld. CIT(A) and hence, we are inclined to uphold findings of the Ld. CIT(A) and reject grounds taken by the Revenue.
Disallowance of PE/ESI contribution on the ground that same cannot be allowed as deduction u/s. 43B - HELD THAT:- As assessee has paid employees’ contribution to PF and ESI on or before due date for filing return of income and thus, deleted addition made by the AO. We do not find any error in the reasons given by the Ld. CIT(A) to delete addition made towards disallowance of employees’ contribution to PF and ESI. Hence, we are inclined to uphold the finding of the Ld. CIT(A) and reject the ground taken by the Revenue.
Re-computation of deduction u/s. 80HHC based on book profits - AO has computed deduction u/s. 80HHC of the Act while computing book profit u/s. 115JB by taking into account profits and gains from business computed after making certain adjustments - HELD THAT:- We find that this issue is squarely covered in favour of the assessee by the decision of Hon’ble Supreme Court in the case of Ajanta Pharma Ltd [2010 (9) TMI 8 - SUPREME COURT] where the Hon’ble Supreme Court has clearly held that for the purpose of computing book profit, in terms of section 115JB, net profit as shown in profit and loss account have to be reduced by amount of profits eligible for deduction u/s. 80HHC and not by amount of deduction u/s. 80HHC of the Act.We find that this issue is squarely covered in favour of the assessee by the decision of Hon’ble Supreme Court in the case of Ajanta Pharma Ltd vs CIT, (supra), where the Hon’ble Supreme Court has clearly held that for the purpose of computing book profit, in terms of section 115JB, net profit as shown in profit and loss account have to be reduced by amount of profits eligible for deduction u/s. 80HHC and not by amount of deduction u/s. 80HHC of the Act.
Include foreign exchange gain as part of the turnover for computing deduction u/s. 80HHC
Additions made by the AO towards estimation of interest on loans given to sister concern.
TDS u/s 195 - disallowance of foreign agency commission u/s. 40(a)(i) - export commission paid to foreign agency without deducting TDS - HELD THAT:- In this case, on perusal of facts available on record, it was very clear that commission paid by the assessee to non-resident for procuring export orders is neither accrued in India nor taxable u/s. 9 of the Act as fees for technical services. Further, the business profits of a non-resident cannot be taxed in India unless such non-resident have permanent establishment in India. It was not the case of the AO that foreign agents have permanent establishment in India. Therefore, we are of the considered view that export commission paid to foreign agents cannot be disallowed u/s. 40(a)(i) of the Act, for non deduction of tax at source u/s. 195 of the Act. The Ld. CIT(A) after considering relevant facts has rightly deleted additions made by the AO. Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject ground taken by the Revenue.
Disallowance of foreign exchange fluctuation loss - HELD THAT:- We find that the Ld. CIT(A) has recorded categorical finding that the assessee had added back this item of expenditure as prior period expense being part of inadmissible items in the computation of total income for the assessment year 2010-11. The Ld. CIT(A) further recorded factual finding that once assessee itself has disallowed said item of expenditure by holing that it does not pertain to year under consideration, then no addition can be made towards said expenditure. Fact remains unchanged. The Revenue fails to bring on record any evidence to counter findings of fact recorded by the Ld. CIT(A). Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject ground taken by the Revenue.
Disallowance u/s 14A r.w.r. 8D - CIT-A deleted the addition - HELD THAT:- If no exempt income for the relevant assessment year, then no disallowance can be made by the AO towards expenditure u/s. 14A r.w.r. 8D of the Act, for assessment years 2011-12 & 2012-13. The CIT(A) after considering relevant facts has rightly deleted addition made by the AO u/s. 14A of the Act. Hence, we are inclined to uphold the findings of the ld. CIT(A) and reject the ground taken by the Revenue.
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2021 (12) TMI 1386 - DELHI HIGH COURT
Assessment u/s 153A - Addition u/s 68 - HELD THAT:- On perusal of the seized material, it is seen that the material referred to in the Satisfaction note does not pertains to AY 2003-04 in most cases. It is further seen from the records that no seized material or statement has been relied upon by the AO while making the addition and that the addition was made when conditions of section 68 of the Act were not fulfilled during the post search proceedings and during the proceedings before the AO. Appeal is squarely covered by the judgment of this Court in Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT]
Accordingly, we find no merit in the present appeal. The same is dismissed.
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2021 (12) TMI 1385 - CALCUTTA HIGH COURT
Condonation of delay - delay of 331 days in filing the appeal - HELD THAT:- As in the case on hand, we are compelled to take a different view on account of prejudice which has been caused to the assessee due to this belated filing of appeal by the revenue. The period of limitation for filing the appeal lapsed on 21st January, 2020. Had the appeal been preferred by the department within the said time, the assessee had an option to go under the Director Tax Vivad-se-Biswas Act, 2020 and file an application before the concerned authority.
On account of the delay in filing the appeal, the assessee was not in a position to exercise such an option. That apart, we have perused the affidavit filed in support of the application for condonation of delay and we find that there is absolutely no reason assigned by the revenue to condone the inordinate delay of 331 days in filing the appeal.
Thus, both on the ground that no sufficient cause has been shown by the appellant/department and also on the ground that the assessee has been put to prejudice which cannot be remedied, we are not inclined to condone the inordinate delay in filing the appeal. Petition for condonation of delay dismissed.
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2021 (12) TMI 1378 - ITAT DELHI
Disallowance u/s 14A r.w.r 8D - CIT-A restricted disallowing to exempt income earned by the assessee - HELD THAT:- We find that the total exempt income earned by the assessee during the year was Rs.382/-. Ld. AO noted that assessee has huge investments mainly on unquoted strategic investments in subsidiary companies and proceeded to make a disallowance u/s 14A at Rs.21,15,14,527/- u/s 14A of the Act read with Rule 8D(2) of the Income-tax Rules, 1962.
CIT (A) referring to the judgments of Hon’ble Delhi High Court in case of Cheminvest Limited [2015 (9) TMI 238 - DELHI HIGH COURT] and CIT vs. Holcim India Pvt. Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT] held that disallowance u/s 14A cannot exceed the exempt income. The aforesaid finding of the ld. CIT (A) is in accordance with law as propounded by the Hon’ble Delhi High Court. So, we do not find any infirmity in the findings returned by the ld. CIT (A) and the same is accordingly upheld. Consequently, the appeal filed by the Revenue is hereby dismissed.
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2021 (12) TMI 1369 - ITAT HYDERABAD
TDS u/s 194H - Demand u/s 201(1) and 201(1A) - TDS recovery mechanism regarding the alleged commission paid to pre-paid mobile distributors in its telecom services - as vehemently contended that there exists no principal to agent relation between the assessee and its distributors giving rise to commission element qua the pre-paid recharge coupons - HELD THAT:- We find no merit in the assessee's instant former substantive grievance since the CIT(A) has duly taken note of hon’ble jurisdictional high court decision in M/s. Vodafone Essar South Ltd. [2013 (10) TMI 934 - ANDHRA PRADESH HIGH COURT] - Their lordships have upheld the departmental stand pertaining to applicability of section 194H involving identical prepaid recharge coupons issued to the distributors. It further appears that the said assessee was the assessee’s group concern only. We thus adopt their lordships foregoing detailed reasoning mutatis mutandis and reject the instant former substantive grievance.
As the legislature has itself incorporated section 201(1) first proviso in the Act vide Finance Act, 2012 w.e.f. 1.7.2012 that an assessee shall not be treated to be the assessee in default for having not deducted TDS provided it furnishes the accountant’s certificate qua its payee to have furnished the latter return of income u/s. 139; taking into account such sum for computation followed by payment of due taxes thereupon; respectively.
Case law CIT Vs. Ansal Landmark Township [2015 (9) TMI 79 - DELHI HIGH COURT] holds the foregoing proviso r.w.s. 40(a)(ia) second proviso (inserted in the Act vide Finance Act, 2012 w.e.f. 1.4.2013) to be carrying retrospective effect being curative in nature. We thus restore the instant issue for the Assessing Officer’s factual verification in the very terms. This identical first and foremost substantive grievance is partly accepted for statistical purposes.
Applicability of “royalty” for the purpose of TDS deduction on domestic auto-roaming charges paid to other telecom operators - applicability of the impugned royalty provision 9(1)(vi) - HELD THAT:- We find no merit in the Revenue’s instant stand. It is made clear that section 194J (1)(c) of the Act stipulating TDS deduction on royalty makes it clear in Explanation (ba) that “royalty” shall have the same meaning as in Explanation 2 clause (i) to (vi) of sub-section (1) of section 9 of the Act.
There is no indication in the Assessing Officer’s TDS recovery order or in the CIT(A)’s findings as to whether the assessee's impugned payments made to the spectrum holder(s); as the case may be, satisfies any of the foregoing clauses defining royalty or not. All the assessees have availed is a standard facility without any customisation. The Revenue’s case is that the assessee fails to dispute the Govt. of India’s action collecting royalty qua spectrum (supra). We observe that the said stipulation between assessee's payee(s) and Govt. to this effect does not in any way mean that it itself has made any royalty payment to very payee(s) for utilizing/uplinking the spectrum in question.
The Revenue’s last argument invoking TDS mechanism going by the assessee suo moto deduction in Assessment Years 2015-16 and 2016-17 (supra) does not ipso facto attract the impugned statutory provisions. We lastly conclude that the specific definition prescribed by the legislature in the Act regarding payment of royalty would override the agreements and corresponding terminology employed between the Govt. of India, Telecom Department with the corresponding spectrum allottees going by stricter interpretation as per hon'ble apex court’s decision in Commissioner of Customs Vs. Dilip Kumar & Co. [2018 (7) TMI 1826 - SUPREME COURT] We accordingly proceed to decide the assessee's instant identical latter substantive ground in both these appeals against the department.
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2021 (12) TMI 1368 - HIMACHAL PRADESH HIGH COURT
Deduction u/s 80IC - whether the process undertaken by the assessee in its industrial unit at Parwanoo amounted to ‘manufacture’ or ‘production’ of the Anchors so as to qualify the requirements? - HELD THAT:- Petitioner seeking permission to withdraw the appeal. Ordered accordingly.
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2021 (12) TMI 1360 - ITAT DEHRADUN
Taxable income to tax u/s 44BB v/s Section 44DA read with section 9(l)(vii) - services provided by the assessee in respect of core pressure & wellbore studies, post stack inversion studies, data processing & maintenance services etc which are prima facie backend activities in the nature of technical services - Assessee argued as Activities are in the nature of ‘mining or like project’ and thus not in the nature of ‘fees for technical services. The services provided by the appellant, were used in the exploration/exploitation of mineral oils - HELD THAT:- As respectfully relying upon the decision of Hon’ble Supreme Court in the case of ONGC [2015 (7) TMI 91 - SUPREME COURT] it is held that the receipts of the Assessee on account of post-stack inversion study, core pressure and wellbore study, data processing and maintenance services were taxable under section 44 BB of the Act.
Contention of the revenue that the amounts have to be taxable u/s 44DA - We hold that to invoke the provisions of Section 44DA, the revenue has to prove that the receipts are indeed or in the nature of FTS taxable u/s 9(1)(vii).
Reimbursement of equipment lost in hole - revenue or capital receipt - HELD THAT:- As the name signifies lost in hole means destruction and loss of capital assets like drilling equipment which are provided by the assessee to oil exploration and. production companies. Therefore, the revenue received on account of loss of equipment does not form income in the hands of the assessee rather it is a mere reimbursement of the cost of equipment destroyed in the process of oil extraction.
As reliance on the decision of the Hon’ble Uttarakhand High Court in the own case of the assessee [2009 (7) TMI 51 - UTTARAKHAND HIGH COURT] wherein the Hon’ble Court held that the receipts on account of equipment lost in hole being in the nature of capital receipts cannot, be included in the revenues chargeable to lax u/s 44BB - We find considerable cogency in assessee's submission as above. Hence, we hold that the Assessing Officer has erred in including the sum received by the assessee as reimbursements for determining the taxable income of the assessee. - Decided against revenue.
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2021 (12) TMI 1359 - ITAT DELHI
Income accrued In India - amount derived by the Appellant on account of distribution revenue from Turner International India Private Limited (‘TIIPL’) as royalty under Section 9(i)(vi) of the Act and also as per the provisions of India-USA Double Taxation Avoidance Agreement (‘DTAA’) - Permanent Establishment (‘PE’) - HELD THAT:- Issue decided in favour of assessee as relying on own case [2020 (10) TMI 245 - ITAT DELHI]
Non allowance of the credit of taxes deducted at source wrongly withheld on revenue not chargeable to tax in India as per Section 9 of the Act - HELD THAT:- Undisputed fact is that the revenue derived from Apalya Technologies Pvt. Ltd. and Parragon Publishing India Pvt. Ltd. are not taxable in India as per Section 9 of the Act. It is also not in dispute that since the income does not form part of the total income of the assessee the credit of TDS was denied. The credit was also denied in A.Y.2013-14 as mentioned elsewhere. The assessee can claim the credit of TDS in the country in which the related income is offered to tax. We, therefore, do not find any reason to interfere with the findings of the DRP. Ground No.7 is accordingly dismissed.
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2021 (12) TMI 1354 - ITAT DELHI
Disallowance u/s 40A(2) - payment to related party - Addition made as Ms. Anjali Lall does not possess the required qualification to undertake the job of interior decoration, repair and maintenance and secondly, the payment is unreasonable and excessive - HELD THAT:- Expression “the Assessing Officer is of the opinion that such expenditure is excessive or unreasonable having regard to the fair market value of the goods, services or facilities” as used in section 40A(2) of the Act makes it abundantly clear that the opinion of the Assessing Officer cannot be formed in vacuum and without any cogent evidence. It is the Assessing Officer who has to establish on record that the payment made to the related party is unreasonable and excessive having regard to the market value of the goods, services or facilities for which payment is made. In the facts of the present case, admittedly, except stating that the related party is not technically qualified to undertake the work and the payment made is unreasonable and excessive, the Assessing Officer has not brought any material on record to demonstrate that the payment made is excessive and unreasonable having regard to the market value of the services for which such payment was made. Thus, the disallowance made under section 40A(2) without being back by cogent evidence and purely on conjectures and surmises, cannot be sustained. Accordingly, we delete the disallowance made - Decided in favour of assessee.
TDS u/s 195 - disallowance u/s 40(a)(i) - failure to withhold tax at source on payment made to various persons/entities outside India towards professional/technical fee - HELD THAT:- Payments made to non-resident attorneys cannot be regarded as FTS under section 9(1)(vii) of the Act. Further, a conjoint reading of section 40(a)(i) and 40(a)(ia) brings out a clear distinction between FTS and fees for professional services. Though, section 40(a)(ia) encompasses, both, FTS and fees for professional services, however, section 40(a)(i) is applicable only in case of failure to deduct tax on payments made for FTS. As rightly submitted by learned counsel for the assessee, this could be for the reason that payment of legal/professional fee to a non-resident does not accrue or arise in India or is not deemed to accrue or arise in India as per section 5 and section 9 of the Act. It is relevant to observe, in the case of NQA Quality Systems Registrar Ltd. Vs. DCIT [2004 (12) TMI 323 - ITAT DELHI-F] the coordinate Bench has held that professional services are a category distinct from technical services.
Thus we hold that the payments made to non-resident attorneys being not in the nature of FTS, there was no obligation on the assessee to deduct tax at source.
Payments made to foreign attorneys are not chargeable to tax under the provisions of the Act, in terms of section 195 of the Act. Therefore, the assessee was not required to withhold tax on the payments made. Accordingly, we delete the disallowance made under section 40(a)(i) of the Act. - Decided in favour of assessee.
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2021 (12) TMI 1352 - ITAT PUNE
TP adjustment pertaining to the Manufacturing segment -Treating subsidy received by the assessee as a revenue receipt or capital receipt - operating revenue for determining the ALP of the Manufacturing segment - Manufacturing segment which comprises of Import of raw material, Sale of manufactured goods, Payment of technical license fees/Royalty and Payment of one time technology transfer fees - HELD THAT:- The assessee received subsidy under Package Scheme of Incentives (PSI) given by the Government of Maharashtra which was treated as an item of revenue receipt and at the same time, it was also included in the operating revenues for determining the ALP of the Manufacturing segment. In a note given to its balance sheet.
Primary contention of the assessee is that the subsidy is in the nature of capital receipt and hence, should be excluded - When we apply such a test on the facts and circumstances of the case, it demonstrably emerges that the purpose of subsidy is industrial growth; it is linked with the setting up of industrial units; and the amount of subsidy is linked with the amount of investment made in the eligible unit. Simply because the subsidy has been disbursed in the form of refund of VAT and CST, it will not alter the purpose of granting the subsidy, which is nothing but establishment of new industrial units in less developed areas of the State. The authorities below have been swayed by the fact that the subsidy was granted post commencement and is in the nature of refund of VAT and CST and overlooked the purpose of its granting, which is nothing but momentum in industrial pace in less developed parts of the State. Testing the factual panorama on the touchstone of the ratio laid down by the Hon’ble Supreme Court in the above referred cases, we are of the considered opinion that the subsidy of Rs.89.73 crore is a capital receipt and not chargeable to tax.
It is relevant to mention that we are concerned with the A.Y. 2014-15. The Finance Act, 2015 has inserted clause (xviii) to section 2(24) w.e.f. 01-04-2016 providing that the assistance in the form of subsidy or grant of cash incentives etc., other than the subsidy which has been taken into consideration in determining the actual cost of the asset in terms of Explanation 10 to section 43(1), shall be considered as an item of income chargeable to tax. Since the amended provision of section 2(24)(xviii) is not applicable to the year under consideration, the sequitur is that the subsidy received by the assessee would not form part of its total income. We, therefore, overturn the impugned order and direct to treat the subsidy as an item of capital receipt not chargeable to tax.
In view of the fact that the subsidy has been held to be a capital receipt, obviously, it cannot form part of operating revenue of the Manufacturing segment of the assessee company for the purpose of determining the ALP under the TNMM.
AR contended that in the hue of the amendment to section 2(24) of the Act, the assessee offered the subsidy as a revenue receipt chargeable to tax for the A.Y. 2016-17 and also claimed it as operating revenue for the purpose of the ALP determination, which issue is sub judice before the Tribunal. We desist from commenting on the treatment of subsidy as an item of operating revenue or otherwise because it is not required for the disposal of the present appeal, for which the subsidy has been held to be a non-operating revenue on the ground that it is a capital receipt and does not form part of the total income of the assessee.
To sum up, the subsidy is capital receipt not chargeable to tax and at the same time it will not be included in the operating revenue for determining the ALP of the Manufacturing segment - we hold that the profit margins of the comparables cannot be reduced by the difference in the amount of Custom Duty because there is no evidence of any difference in the Custom Duty rates paid by the assessee as well as the comparables. Respectfully following the precedent, we uphold the impugned order on this score. This ground fails.
Comparable selection - Inclusion of Bharat Earth Movers Limited and JCB India Limited in the list of comparables - TPO included Bharat Earth Movers Limited in the list of comparables despite the assessee’s objections - AR submitted that the comparable was there in the immediately preceding assessment year and the Tribunal has directed to exclude the same from the list of comparables. Relevant discussion has been made in para 7 of the Tribunal order. After considering the relevant material, the Tribunal has directed to exclude Bharat Earth Movers Limited. The ld. DR could not controvert the argument of the assessee. Respectfully following the precedent, we order to exclude this company from the list of comparables. This part of the ground is, therefore, allowed.
Next comparable assailed by the assessee is JCB India Limited, which was included by the TPO in the list of comparables - No relief was allowed by the DRP. The ld. AR fairly submitted that the inclusion of JCB India Limited in the list of comparables was challenged by the assessee for the immediately preceding assessment year as well but the Tribunal has upheld the decision of the authorities below in this regard. We have perused the order passed by the Tribunal on this issue for the immediately preceding assessment year. Relevant discussion has been made in para 8 of the order. After elaborate analysis of the factual and legal position, the Tribunal has finally held that JCB India Limited was rightly included in the list of comparables. Following the same view, we countenance the inclusion of this company in the list of comparables. This part of the ground is, therefore, dismissed.
Transfer pricing adjustment on entity level as against the proportionate adjustment - AR submitted that similar issue was raised in the assessee’s appeal for the immediately preceding assessment year and the Tribunal was pleased to direct the AO/TPO to restrict the transfer pricing adjustment to the extent of international transactions under the Manufacturing segment. The ld. DR also fairly admitted the position. Respectfully following the precedent, we direct the AO/TPO to restrict the transfer pricing adjustment to the extent of international transactions under the Manufacturing segment.
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2021 (12) TMI 1351 - ITAT DELHI
Assessment u/s 153A - Addition u/s 68 - unexplained share capital received from 24 persons - neither the creditworthiness of these creditors nor the genuineness of transactions were established as submitted by the AO in Assessment Order and Remand Report - CIT(A) was convinced that the assessee has successfully discharge the onus cast upon it by provisions of Section 68 of the Act and deleted the addition - HELD THAT:- On these facts ratio laid down by the Hon'ble High Court of Delhi in the case of Kabul Chawla .[2015 (9) TMI 80 - DELHI HIGH COURT] which was followed in the case of Meeta Gutgutia [2017 (5) TMI 1224 - DELHI HIGH COURT] squarely apply where.has held that where no incriminating material was unearthed to show that there was violation by the assessee to disclose income/additions made by the Assessing Officer was not justified. - Decided in favour of assessee.
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