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2021 (11) TMI 1144
TP Adjustment - selection of comparables - exclusion of two companies Larsen & Toubro Infotech Limited, and Persistent Systems Limited on account of application of upper turnover filter - HELD THAT:- As decided in Pentair Water Private Limited [2016 (5) TMI 137 - BOMBAY HIGH COURT] as directed the AO / TPO to exclude from the list of comparables, the companies having turnover of more than Rs.200 crore We direct the AO / TPO to exclude L&T Infotech Limited and Persistent Systems Limited from the list of comparables for having high turnover as compared to assessee providing Software Development (SWD) services to its Associate Enterprises (AEs). Tech Mahindra Limited is functionally dissimilar to that of the assessee. Tech Mahindra Limited has got multiple segments and on perusal of the segmental details in the consolidated report, i....... + More
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2021 (11) TMI 1142
Unexplained Investment - appellant has paid “On-Money" - Discharge of onus - HELD THAT:- On money payment added in the hand of the assessee is not based upon any incriminating material found from the assessee or his premises. It is also not the case that any material in assessee or its staff handwriting has been found. It is also not the case that revenue has gotten the value of said premises independently valued to support the case of value more than that reflected in books. Assessee’s plea of crossexamination has also been rejected. It is settled law that in allegation of on many payment , revenue is required to prove the case with convincing material. This proposition is supported by Hon’ble Supreme Court in the case of K. P. Varghese [981 (9) TMI 1 - SUPREME COURT] and Kalyansundaram [2007 (9) TMI 25 - SUPREME C....... + More
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2021 (11) TMI 1140
Validity of assesment u/s 153A - validity of approval of the draft assessment order u/s 153D - HELD THAT:- Since, the Assessing Officer has sought approval u/s 153D of the Act in the case of assessee from Assessment Years 2005-06 to 2011-12, therefore, in view of our order [2022 (3) TMI 643 - ITAT DELHI] in assessee’s own case for Assessment Year 2009-10 reproduced above, we hold that the assessment orders are vitiated for want of valid approval u/s 153D of the Act and as such no addition could be made against the assessee. We, therefore, quash the assessment orders passed u/s 153A of the Act for both the years, resultantly, all additions are deleted - Decided in favour of assessee.
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2021 (11) TMI 1138
TP Adjustment - Comparable selection - Turnover filter - HELD THAT:- Companies listed whose turnover in the current year is more than ₹ 200 Crores should be excluded from the list of comparable companies. Also companies dissimilar with assessee captive service provider providing services only to its associated enterprise need to be deselected. Negative working capital adjustment - HELD THAT:- We find that in the case of Software AG Bangalore Technologies (P.) Ltd.[2016 (3) TMI 1384 - ITAT BANGALORE] passed by this Tribunal, it has been held that negative working capital adjustment shall not be made in case of a captive service provider as there is no risk and it is compensated on a total cost plus basis. Since the issue has not been dealt with by the TPO in proper perspective and since the issue has not been raised before the DRP, w....... + More
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2021 (11) TMI 1137
Income deemed to accrue or arise in India - Taxability of income generated in India - appellant has received revenue from cinema halls/theatres in India - PE in India under the India-USA Tax Treaty - AO concluding that the income has directly accrued and arisen in India - AO royalty received by the appellant from Warner Bros. Pictures (India) Pvt. Ltd. as business income u/s 9(1)(i) - HELD THAT:- We find the Hon’ble Tribunal in assessee’s own case for the earlier years has allowed the claim in favour of the assessee. We considered the decision of the Coordinate Bench of this Honble Tribunal for the A.Y 2014-15 [2019 (10) TMI 1543 - ITAT MUMBAI] as rightly held by the CIT (A) even if income arises to the Non-Resident due to the business connection in India, the income accruing or arising out of such business connection can only....... + More
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2021 (11) TMI 1134
Disallowance u/s 14A - AO held that the suo moto disallowance offered by the assessee is not properly explained - HELD THAT:- Disallowance offered by assessee was considered by learned assessing officer. In addition, the same was rejected giving proper reasoning. Therefore it is apparent that the learned assessing officer has recorded proper satisfaction for invoking the provisions of rule 8D of the income tax rules 1962 for working of the disallowance u/s 14 A of the act. Disallowance u/r 8D (2)(i) - The total investment made by the assessee in which tax-free income could have been earned is ₹ 1343 crores as on that date. Further, that investment from which exempt income has been actually earned during the year is only ₹ 605 crores. Furthermore, the investment made by the assessee is out of the mixed funds, as it did not main....... + More
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2021 (11) TMI 1132
TP adjustment - international transaction pertaining to purchase of traded goods - selection of MAM - HELD THAT:- We have also perused the order of the coordinate bench in assessee’s own case in earier years. We appreciate the arguments of the parties with respect to the risk assumed by the normal distributor as well as the risk assumed by the assessee. However we find that the issue is squarely covered by the decision of the coordinate bench in assessee’s own case [2018 (7) TMI 2083 - ITAT DELHI] findings returned by TPO/DRP that the taxpayer being a full-fledged risk bearing distributor performing numerous functions, RPM is not the MAM, is not sustainable for the reason that in a comparable uncontrolled transaction, normally distributor requires to carry out all the functions necessary to enhance the sales like market resear....... + More
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2021 (11) TMI 1129
TP Adjustment - comparable selection - assessee in engaged in the business of provision of Software Development Services (SWD services), to its wholly owned holding company - HELD THAT:- Companies functionally dissimilar with that of assessee is directed to be deleted. Deduction u/s 80JJAA - AO denied the claim of the assessee for deduction as that persons working in software units cannot be regarded as workmen as contemplated by the provisions of section 80JJAA AND Deduction under section 80JJAA cannot be allowed in respect of additional wages paid to employees who are working in 10A units because under the provisions of 80A(4) of the Act, the assessee cannot enjoy benefits both under sections 10A and 80JJAA of the Act in respect of the same income. - DRP also took the view that, the assessee has not given Form 10DA for each 10A unit sep....... + More
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2021 (11) TMI 1124
TP Adjustment - upward adjustment in respect of advertisement and marketing ('A&M') expenses - existence of international transactions - TPO as well as the Hon’ble DRP inferred the existence of international transactions on noticing that the appellant had incurred excess expenditure on A&M expenses as compared to the expenses incurred by the comparables chosen by the TPO and then proceeded to make adjustments of difference in order to determine the value of such A&M expenses incurred by the AE - HELD THAT:- main contention advanced by the appellant is that the existence of international transaction cannot be inferred by the TPO in the absence of any actual transactions and the presumption by the lower authorities that the benefit had enured to its foreign AE is merely based on the conjectures. In the absence of a....... + More
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2021 (11) TMI 1123
Benefits of principle of mutuality - As per AO activity carried out by the assessee is not a charitable one and the assessee is earning heavy surplus by charging the members as per its discretion and is indulged in transactions with non-members which vitiates the principle of mutuality on the first place - HELD THAT:- AO denied the benefit of concept of mutuality by taking view that the department has already filed against the earlier decision of Tribunal in various years. CIT(A) allowed relief to the assessee by following the decision of Tribunal in assessee’s own case for earlier year - We note that assessee’s own case for AY 2010-11 [2018 (3) TMI 1983 - ITAT SURAT] the co-ordinate bench of Tribunal while following the order in earlier year accepted the status of assessee as a mutual association in order [2018 (3) TMI 1983 -....... + More
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2021 (11) TMI 1122
TP Adjustment - international transaction entered into by the assessee with respect to management services fees paid by the assessee to its Associated enterprises - assessee benchmarked the same under the Transactions Net Margin Method clubbing the same with other transactions - Arms’ length price of the same is determined by the ld TPO at Rs. Nil as assessee failed to satisfy Need test, benefit Test, Rendition test etc. the ld CIT(A) confirmed it - only objection of the ld TPO which is threshold of examination of any services rendered is only whether the services have been rendered or not - HELD THAT:- The details of number of test is devoid by them is also tabulated and same is multiplied by the rate of services each day. This is the supporting attached with the bills of services. Coming to the agreement which is placed at page No....... + More
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2021 (11) TMI 1121
Deduction u/s 80P(2)(d) - income received from cooperative banks - AO as well as CIT(A) was of the opinion that the same does not call for exemption u/s 80P(2)(d) of the Act as they were received from a cooperative bank - HELD THAT:- The reasoning of the lower authorities cannot be sustained in the eyes of law as the cooperative banks also the spies of the cooperative societies and continue to be cooperative society despite the fact that they enjoy the licence from Reserve Bank of India to carry out the business of the banking. Whether the cooperative banks is also cooperative society or not? - This issue was considered in the case of CIT vs. Totagars Cooperative Sale Society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] wherein referring to the Hon’ble Supreme Court in the case of Totgars Co-operative Sales Society Ltd. [2010 (2) TMI ....... + More
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2021 (11) TMI 1120
Revision u/s 263 by CIT - deduction u/s 80P(2) - PCIT however referred to the Banking Regulation Act of 1949 and held that as per Part V of the Banking Regulation Act, a co-operative bank is different from the cooperative society and the deduction has been wrongly allowed by the Assessing officer - whether interest on FDRs placed with Jaipur Central Co-operative Bank Ltd is eligible for deduction u/s 80P(2)(d) - HELD THAT:- In case of M/s Jaipur Zila Dugdh Utpadak Sahakari Sangh Ltd,[2019 (10) TMI 759 - ITAT JAIPUR] we find that the Coordinate Bench has considered the meaning of cooperative society and cooperative bank and has referred to the decision of Totagars Co- operative sale society [2017 (1) TMI 1100 - KARNATAKA HIGH COURT] The Coordinate Bench thereafter held that for the purposes of section 80P(2)(d) of the Act, Jaipur Central C....... + More
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2021 (11) TMI 1119
Disallowance of the expenses incurred under employee stock option (‘ESOP’) scheme - HELD THAT:- Hon’ble Madras High Court in the case M/s. PVP Ventures Limited T. Nagar, Chennai [2012 (7) TMI 696 - MADRAS HIGH COURT] while the order has been passed in relation to appeal against the order u/s 263, we find that the issue of the allowability of the expenditure pertaining to ESOP has been clearly dealt by the Hon’ble High Court. In the case of CIT Vs. Lemon Tree Hotels Ltd. [2015 (11) TMI 404 - DELHI HIGH COURT] allowed the ESOP expenditure as expenses has revenue expenditure. Since, it can be gauged from the above judgments that the expenditure incurred in connection with the ESOP is treated as revenue expenditure, we hereby allow the ground of appeal on this issue. Since, the grounds have been allowed on merits of th....... + More
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2021 (11) TMI 1117
Exemption u/s 80P(2)(a)(i) - whether the appellant can be termed as a cooperative society or cooperative bank? - HELD THAT:- The undisputed position is that the appellant is registered a cooperative society under the Karnataka State Co-operative Society Act, 1959 and does not enjoy any licence from Reserve Bank of India to carry on the business of banking. It is a trite law that the assessing authority cannot go behind the registration certificate granted under the Cooperative Societies Act as held in the case of The Mavilayi Service Cooperative Bank Ltd. & ors.[2021 (1) TMI 488 - SUPREME COURT] So long as the appellant society had not obtained any licence from Reserve Bank of India for the purpose of banking business, it cannot be termed as cooperative bank. We hold that the appellant status continued to be a cooperative society thou....... + More
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2021 (11) TMI 1116
Estimation of income - bogus purchases - HELD THAT:- It is not in dispute that assessee had made purchases from tainted dealers whose names appear in the website of sales tax department, Government of Maharashtra. It is not in dispute that the corresponding sales made by the assessee out of such disputed purchases from two parties were not doubted by the ld. AO. It is not in dispute that assessee had submitted the details of purchases, invoice bills alongwith bank statements evidencing the fact that payments have been made to those suppliers only by account payee cheques. Since the corresponding sales made by the assessee out of the disputed purchases has not been doubted by the Revenue, we find that the ld. CIT(A) had rightly held that only the profit element needs to be brought to tax and not the entire value of the purchases. We find t....... + More
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2021 (11) TMI 1113
Rectification u/s 254 - unexplained source of money deposited in the bank account - Sham assessee submitted wherein the confirmation with respect to M/s. Sheela Credit & Leasing Limited for payments made by the assessee was submitted, but has been ignored by the bench - HELD THAT:- No details of re-payment to M/s. Sheela Credit & Leasing Limited has been submitted. Therefore, the bench held that agreement to sell entered into by the assessee with M/s. Sheela Credit & Leasing Limited was a sham agreement and it was made just to explain the source of money deposited in the bank account of the assessee. We find that assessee has submitted letter dated 21st June, 2017 wherein assessee referred to the confirmation from that company along with the letter of confirmation dated 31st March, 2019 was also submitted. The above letter was....... + More
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2021 (11) TMI 1106
Addition u/s 68 - assessee company has received share premium and the shareholders were not found at their respective addresses and the assessee could not produce the directors of the investor companies - assessments u/s 143(3) of the Act of the share subscriber companies were completed - CIT-A deleted the addition - HELD THAT:- We find from the various details furnished by the assessee in the paper book that it has filed the master data of all the investor companies as downloaded from the MCA website, therefore, we find merit in the argument of the ld. Counsel that the Revenue cannot allege that the investor companies are bogus when the assessments u/s 143(3) of the Act of the subscriber companies were completed by the Income-tax Department during the same period. The entire amount had been received by the assessee company through normal....... + More
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2021 (11) TMI 1104
TDS u/s 194C OR 194J - short deduction of tax and for interest u/s 201(1A) imposed - payments made for supply and installation of computers, commissioning of computer laboratories and technical manpower and to Vimal Electronics for supply and installation of solar photo voltaic panels - HELD THAT:- Entire contract is for supply of computer hardware, software, connected accessories, UPS, furniture, stationary, consumables, etc., and this contract is to be carried out by the contract through its own personnel. Thus, it is a simple contract of carrying out a work. Section 194J applies to a person responsible for paying to any resident any sum by way of fees for professional/technical services. In the present case, the contractor has not made available any technical services to the assessee but has only provided the computer hardware, softwar....... + More
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2021 (11) TMI 1101
TP Adjustment - selection of MAM - addition to the returned income of the appellant by re-computing the arm's length price (ALP) of the international transactions under section 92 - rejection of internal TNMM applied by the assessee - HELD THAT:- DRP was not correct in considering the services/scope of work from the agreement entered into by the assessee with its AE for ‘procurement of IT Services’ and comparing the same with the back-end ITeS Services provided by the assessee to AEs. In the present case best suited method is that of internal TNMM. The financial data pertaining to internal segmentation is more reliable and accurate, as compared to financial data of external comparable companies, therefore, it will be appropriate to apply internal benchmarking analysis over external benchmarking analysis. This finds support....... + More
