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2022 (3) TMI 1541
Jurisdiction to reassess - Jurisdiction over Appellant as employed in the Army - Army Salary Circle AO or Income-tax Officer, Ward 3(5) Gurugram - HELD THAT:- It is now well settled that it is only the AO holding charge over an assessee for assessment purposes who could issue a notice for reassessment. No AO, other than the assessee s own AO, could issue a notice for reassessment. ITO Ward 3(5), Gurugram has issued the notice u/s 148 to the Appellant as employed in the Army after having recorded a satisfaction as to the alleged escapement of income of the Appellant. ITO Ward 3(5) Gurugram does not seem to have made any inquiry on the relevant issues before issuing a notice u/s 148 to the Appellant. No material in this behalf has been brought before us by the Department. As in Lt. Col. Paramjeet Singh [ 1996 (3) TMI 120 - PUNJAB....... + More
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2022 (3) TMI 1536
Bogus LTCG - Addition u/s 68 - HELD THAT:- We found that the findings of the revenue authorities are not justified and are irrational, they have deliberated the matter without due application of mind, identity of the investor had duly disclosed by the assessee and identified by the AO, all the transactions were through proper banking channel, no cash deposit was found as alleged by the AO, assessee has discharged its duty by providing all the relevant material required for the investigation. Therefore, application of section 68 of the income tax act in the instant case is not reasonable and uncalled-for. Disallowance of Belated remittance of EPF contributions - statutory dues paid after the due date but before filing of the ITR u/s 139(10) - HELD THAT:- Employer s contribution admittedly paid before the date of filing of return is....... + More
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2022 (3) TMI 1535
Delayed Employees Contribution to Provident Fund/ E.S.I deposited during the Financial Year itself before due date of filing of Return - Disallowances u/s 36(1)(v)(a) r.w.s. 43B - Scope of amendment as inserted in the Act by Finance Act 2021 - HELD THAT:- As recently in the matter of Mahadev Cold storage [ 2021 (6) TMI 506 - ITAT AGRA] had the occasion to deal with the issue of disallowance under section 43B of the act and after elaborate examining the law on the subject, it was held that the disallowance under section 43B of the act is not permissible if the assessee had made the contribution before the due date of filing of the return of income. The same principle, continues to hold good for issue under consideration as the assessment years under consideration, are much prior to the year of amendment which was inserted in the Act by....... + More
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2022 (3) TMI 1533
TP Adjustment - Computation of Arm's Length Price - comparable selection - Tribunal directed to be excluded Infosys BPO Ltd., Eclerx Services Ltd., and Crossdomain Solutions Pvt. Ltd., as comparable companies - HELD THAT:- As comparing the functional profile of the companies with that of assessee we direct exclusion of the aforesaid 3 companies from the list of comparable companies. TPO while determining the ALP has considered the entire turnover of the assessee and made an adjustment under section 92 of the Act whereas in law, an adjustment should be restricted only to the transactions with AE - The law is well settled that the addition on account of determination of ALP should be restricted only to the transactions with AE and it cannot be made in respect of transactions with non-AE. The Hon'ble Mumbai Tribunal in the ca....... + More
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2022 (3) TMI 1530
Addition on the basis of Departmental Valuation Officer s [DVO] - difference between the value shown by the assessee in the books of account and value estimated by the DVO of the property Spanish Garden - HELD THAT:- Once the assessee is maintaining regular books of account and in the course of its business the assessee has recorded the transactions in its books of account, then, without finding/pointing out any defect in the books of account and without holding that the books of account are rejected, then the AO cannot proceed to make addition on the basis of DVO s report. In the case of Sargam Cinema [ 2009 (10) TMI 569 - SC ORDER] has held that the assessing authority could not refer the matter to the DVO in a case where there was no categorical finding recorded by the Tribunal, then the books of account were never rejected. Appeal of assessee allowed.
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2022 (3) TMI 1528
TP Adjustment - Manufacturing segment - TPO has rejected the segmental profit and loss account given by the assessee and reworked the segmental profit and loss account - HELD THAT:- TPO has not given any reason for rejecting the segmental profit and loss account given by the assessee. TPO has redrawn the segmental profit and loss account on order u/s 92CA. No basis of allocation has been given in the order. Assessee has rightly contended that section 92 of the Act can be applied only in respect of international transactions, i.e., transactions with AE. We hold that the transfer pricing adjustment should be restricted only to the AE related transactions of the assessee. It would be just and appropriate to set aside the impugned order on this issue and remand the issue to the TO / TPO to verify the segmental profit and loss account....... + More
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2022 (3) TMI 1524
Rectification of mistake - deduction u/s 42 disallowed by the AO - AO grant depreciation on the asset being Oil well and Oil field equipment at the rate of 10% - HELD THAT:- We rectify the para 26.1 of the order of the ITAT as detailed we direct the AO to allow depreciation at the rate of 60% on the oil well and oil field equipment as plant machinery as provided Entry II(8)(xii) as Appendix I to the Income Tax Rules, 1962. Additional depreciation u/s 32(1)(iia) which has not been adjudicated by the ITAT inadvertently - Admittedly, the assessee has requested for allowing the additional depreciation on the Oil field and oil field equipment but the ITAT has omitted to adjudicate the additional depreciation claimed u/s 32(1)(iia) of the Act inadvertently which is a mistake apparent from record within the meaning of the provisions of....... + More
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2022 (3) TMI 1522
TP Adjustment - adjustment to operating cost on account of foreign exchange fluctuation - HELD THAT:- TPO s and Assessee s comparable companies had an average import purchases to total purchases ratio of 10.33% and 3.65% respectively against the Assessee s ratio of 72.60%. As a result, the Assessee is more prone to the impact of foreign exchange fluctuation. Pre-agreed contracts with customers prevents passing the additional costs as a result of forex impact - Assessee had to oblige with the terms of contract and supply the products at the committed rate for the entire year even though there was significant increase in the cost of the products by virtue of higher cost of the components being imported vis- -vis comparable companies selected by the Assessee who had either no imports or less significant imports - also to be noted th....... + More
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2022 (3) TMI 1518
Disallowance of provision for warranty - Methodology of the appellant company for the computation of provision of warranty - HELD THAT:- We have gone through the orders of lower authorities and find that though the lower authorities had considered the decision in the case of Rotork Controls India (P.) Ltd. [ 2009 (5) TMI 16 - SUPREME COURT] had not applied the ratio of the said decision in right perspective. The appellant company also has failed to demonstrate before us as to how the methodology adopted by it for computation of provision for warranty satisfies the parameters laid down (supra). Accordingly, this ground of appeal is remitted back to the file of AO for de novo consideration and decide this issue in accordance with ratio of decision in the case of Rotork Controls India (P.) Ltd. vs. CIT (supra) after providing a reason....... + More
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2022 (3) TMI 1516
Disallowance u/s 14A r.w. Rule 8D - main contention that the CIT(A) has deleted the said disallowance u/s 14A r.w. Rule 8D by ignoring the CBDT Circular No.5/2014 dated 11.02.2014 - HELD THAT:- Assessee did not claim any expenses. No deduction was claimed, therefore, there should be no disallowance expenses, hence, on this aspect also no disallowance u/s 14A r.w. Rule 8D is required. CIT(A) has also dealt with the finding of the AO. AO computed the average value of the investment which did not yield the exempt income but CIT(A) has relied upon the decision of the case titled as Rainy Investments P. Ltd in which it is [ 2013 (2) TMI 602 - ITAT MUMBAI] specifically held that the share application money which is not capable to yield exempt income, is not required to be considered for computing the disallowance u/s 14A r.w. Rule 8D als....... + More
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2022 (3) TMI 1514
Revision u/s 263 - PCIT power to review that order of the CIT, Appeals.case was converted from limited scrutiny to complete scrutiny - Merger of order of AO with CIT - LTCG computation - assessee liability on MAT - HELD THAT:- Case of the assessee was converted to a complete scrutiny from limited scrutiny. In the assessment proceeding the ld. AO touched upon the various aspects issue of capital gain and has made adjustments to the returned income. Against the said order of the assessing officer the assessee has preferred an appeal before the Commissioner of Income Tax, Appeals- 2, Jaipur and the appeal of the assessee was dismissed vide order dated 31.01.2018. Whereas the order in question was passed on 08.03.2019. Therefore, the order of the Commissioner of Income Tax, Appeals-2 order mergers with the order of the Assessing Offic....... + More
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2022 (3) TMI 1513
TP Adjustment - characterisation carried out by the Ld.TPO of the assessee s business - HELD THAT:- As submitted that for A.Y. 2010-11, assessee was identically characterised in the TP study which has not been disturbed by the transfer pricing officer therein. Subsequently, assessee has been characterised in different ways in the subsequent assessment years which needs to be verified at the end of Ld.TPO. In the interest of justice and to remain consistent in the approach of characterisation of assessee s business module, we remand the transfer pricing issues to the Ld.AO/TPO for de novo verification. Assessee is directed to file complete details regarding FAR analysis before the authorities in order to substantiate its arguments regarding the characterisation in the TP study. TPO is directed to analyse the details so filed by as....... + More
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2022 (3) TMI 1512
TP adjustment - adjustment made towards cost contribution charges - HELD THAT:- We notice that the coordinate bench of the Tribunal in the case of Ingersoll Rand India Ltd [ 2016 (4) TMI 202 - ITAT BANGALORE] has considered the similar issue wherein Tribunal has held the appeal in favour of the assessee by deleting the DRP adjustment made towards cost contribution charges. As considered the submission of the Ld AR with respect to the cost contribution charges which is paid for cost allocation done by the group and that a similar cost is getting allocated to Ingersoll Rand India Ltd using the same allocation methodology. The contention of the Ld AR that the decision of the coordinate bench is applicable to the assessee s case has merits. Decided in favour of assessee. Treating cost construction charges as a separate class of tra....... + More
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2022 (3) TMI 1511
TP Adjustment - Trading segment - non consideration of segmental margin as furnished by the Assessee - HELD THAT:- TPO s observation that total expenses are to be taken into consideration for computing the operating margin is incorrect as costs pertaining to a totally unrelated segment cannot be taken into consideration while computing the margin of the trading segment - on the cost of Rs. 40.31 crores incurred while rendering the technical and marketing support services, the Assessee has charged a mark-up of 5%. More importantly, the TPO has taken the very same costs of Rs. 40.31 crores while arriving at the margin of the MSS segment after bifurcating the same into ITES segment and MSS segments. While the DRP directed the TPO to verify and reduce the costs if they were included by the TPO in the operating expenses while arriving at th....... + More
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2022 (3) TMI 1510
Validity of order u/s 92CA(3) - period of limitation - Time limit for completion of assessments and reassessments - protection u/s. 292BB - HELD THAT:- Hon ble Delhi Tribunal in case of Honda Trading Corporation Vs. DCIT [ 2015 (9) TMI 846 - ITAT DELHI ] held that the time limit specified u/s 92CA(3A) is mandatory and not directory and therefore the Ld.TPO is bound by the time limit for passing of the order u/s 92CA (3) of the Act. Thus we hold that the order of the Ld.TPO passed on 30.01.2015 is barred by limitation and liable to be quashed. Therefore, consequently, the proposed addition on account of transfer pricing adjustment amounting to does not survive.
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2022 (3) TMI 1509
Income deemed to accrue or arise in India - royalty receipt - subscription fee received by the assessee from Indian customer for providing access to the database - India-Malaysia DTAA - PE in India - assessee submitted that subscription fees received by the assessee are in the nature of business income - HELD THAT:- Payments towards all kind of information would not be in the nature of Royalty. To determine the exact nature of the payment, the type of information passed on, needs to be verified. A perusal of Article 12(3) shows that, it brings within the ambit of the definition of 'Royalty', payment made for use of, or the right to use any copyright of a literary, artistic, or scientific work. In our understanding Article 12(3) covers only those payments that allow a payer to use/acquire a right to use copyright in literary,....... + More
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2022 (3) TMI 1508
Short Term Capital Gains u/s. 50 - assessee submitted before the AO that the sold property was part of block of assets as defined u/s 2(11) of the Act and that the assessee was claiming depreciation on the said building until the previous financial year - CIT(A) upheld the decision of the AO stating that the asset sold is no longer part of the block of assets, as no depreciation was claimed on the asset and hence the gain arising out of the sale of asset has to be treated as short term capital gains - HELD THAT:- From the definition it is clear that all the assets falling under the same class and for which the same rate of depreciation is prescribed, constitute one block of asset. In assessee s case, the let out building against which no depreciation is claimed i.e. the building with NIL depreciation is grouped under the block. The inc....... + More
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2022 (3) TMI 1507
TP Adjustment - comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee, a captive service provider, rendering Software Development Services to its parent company need to be deselected. Admittedly the turnover of Infosys Ltd., R S Software India Ltd., and Sasken Communication Technologies Ltd are more than 200 crores. Considering the assessee being a captive service provider, aforesaid three companies should be excluded from the list of comparable companies. Working Capital Adjustment - It is settled principle that working capital adjustment cannot be restricted or can be negative. The assessee placed reliance on the decision in the case of Huawei Technologies India [ 2018 (10) TMI 1796 - ITAT BANGALORE] wherein coordinate bench of this Tribunal held that working capital should be allowed as ....... + More
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2022 (3) TMI 1506
Disallowance u/s 40(a)(ia) - proceedings initiated u/s 201(1) / 201(1A) - AO disallowed the deduction claimed stating that the assessee did not furnish a one-to-one correlation of the provisions created with the invoices subsequently raised and TDS is remitted - HELD THAT:- The amount which was disallowed earlier by the assessee is claimed as a deduction u/s.40(a)(ia) in the year under consideration based on the fact that the assessee has deducted and remitted the TDS on the amount in year under consideration. There is no other condition attached while claiming the expenditure in the year of TDS remittance under the law. Hence the reasons given by the AO for disallowance that one-to-one matching with the provision made for the previous not done and that the invoices pertain to previous year are not tenable. The fact as submitted by the....... + More
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2022 (3) TMI 1504
TP Adjustment - assessee has given loan to its A.E. and hence, the TPO has adopted prime lending rate prescribed by the State Bank of India - HELD THAT:- We notice that the TPO has adopted external CUP for making this transfer pricing adjustment. Before us, the assessee could not furnish any material to controvert the reasoning given by the TPO. AO has computed interest on the closing balance - The ledger account of Eurocor - We notice that there was opening debit balance and during the year under consideration, the assessee has advanced further amounts on various dates. Hence, in our view, the TPO should have computed interest on time basis. Accordingly he was not justified in computing interest for the entire year on the closing balance. Accordingly, while upholding the view of TPO that transfer pricing adjustment is required to ....... + More
