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Income Tax - Case Laws
Showing 221 to 240 of 1116 Records
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2015 (10) TMI 2420 - ITAT JAIPUR
Unverifiable purchases - Rejection of books of account - purchases made by the appellant are not genuine and are not verifiable - trading addition - Held that:- In view of the decision of this Coordinate Bench in the case of Anuj Kumar Varshney vs. ITO and others Gems and Jewellery cases [2015 (4) TMI 533 - ITAT JAIPUR] addition is restricted to 15% of unverifiable purchases which will be worked out by AO accordingly. - Decided in favour of assessee in part.
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2015 (10) TMI 2419 - ITAT HYDERABAD
Transfer pricing adjustment - selection of comparable - Held that:- The issue relating to comparable nature of nine out of above eleven companies (companies in original grounds as well as additional grounds taken together), viz. other than Flextronics Software Systems Ltd. (Seg.) and Helios & Matheson Information Tech. Ltd. has come up for consideration before this Tribunal for assessment year 2007-08 itself and in the case of Sumtotal Systems India P. Ltd., Hyderabad [2014 (8) TMI 870 - ITAT HYDERABAD] has accepted the contentions for exclusion of these nine companies under consideration before it.
Comparable nature of Flextronics Software Systems Ltd.(Seg) and Helio & Matheson Information Tech Ltd., has been rejected by coordinate bench of the Tribunal in the case of M/s. Axsys Heathcare Ltd. [2014 (6) TMI 371 - ITAT HYDERABAD] on the ground of High Turnover- functionally dissimilar.
In the case of Sumtotal Systems India P. Ltd., Hyderabad [2014 (8) TMI 870 - ITAT HYDERABAD] wherein the Tribunal vide its order has rejected the contentions of Assessee for inclusion of all the six companies under consideration before it [Aztec Soft Ltd., Birla Technologies Ltd., Indium software India Ltd., Larsen & Toubro Infotech., PSI Data systems Ltd. (SEG) and VMF Softech Ltd.]
Computation of deduction under S.10A - reducing the communication charges from the export turnover considering it as attributable to the delivery of computer software outside India, but not reducing the same from the total turnover - Held that:- this Tribunal in similar cases, including in assessee’s own case for the assessment year 2006-07 have directed the Assessing Officer to exclude the communication charges from export turnover as well as total turnover while computing deduction under S.10A of the Act. In this view of the matter and respectfully following the decision of the Bombay High Court in the case of Gemplus Jewellery (2010 (6) TMI 65 - BOMBAY HIGH COURT) and Sak Soft Limited [2009 (3) TMI 243 - ITAT MADRAS-D] we allow this ground of Assessee
Penalty under S.271(1)(c) - difference in the value of Arm’s Length Price - CIT(A) deleted penalty levy - Held that:- The determination of the Arm’s Length Price is a result of an estimation on the basis of different variables by both Assessee and the Assessing Officer, and the difference in the value of Arm’s Length Price arrived at by the Assessing Officer was due to its re-working by using different filters and consequently different comparables. This difference is merely a difference of opinion, which cannot be termed as concealment of income on the part of Assessee. Further observing that there is no suggestion in the TPO’s analysis or the assessment or penalty orders that there was any inaccuracy or incorrect in the information submitted by Assessee, and relying on the decision of the Supreme Court in the case of CIT V/s. Reliance Petro-Products Pvt. Ltd.(2010 (3) TMI 80 - SUPREME COURT), the CIT(A) cancelled the impugned penalty. - Decided in favour of assessee.
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2015 (10) TMI 2418 - ITAT MUMBAI
Addition representing forefeiture of warrants u/s. 28(iv) - Held that:- An identical issue was considered in M/s. Graviss Hospitality Ltd. case [2014 (12) TMI 139 - ITAT MUMBAI] wherein on identical set of facts the Tribunal has held that the amount of forefeited share application money transferred to "warrant forefeiture account" in the capital reserve, is a capital receipt only and cannot be taxed as income of the assessee, either u/s. 28(iv) or u/s. 41(1) of the Act. We find that while deciding this issue, the Tribunal has considered the decision of T.V. Sundaram Iyengar & Sons [1996 (9) TMI 1 - SUPREME Court] - Decided in favour of assessee.
Addition made u/s.14A - CIT(A) deleted the addition - Held that:- We find that the facts are identical to the facts considered in earlier assessment years. We, therefore, direct the AO to recompute the average investments in the line of A.Yrs. 2005-06 & 2006-07. We, therefore, do not find any error/infirmity in the findings of the Ld. CIT(A) - Decided in favour of assessee.
Disallowance of depreciation in respect of portion of value shown in the books which represented over invoicing of assets as detected during the course of survey - Held that:- disallowance of depreciation made by the AO is not sustainable in law. This decision of the Tribunal was followed in A.Y. 2007-08 - Decided in favour of assessee.
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2015 (10) TMI 2417 - ITAT MUMBAI
Registration u/s. 12A(1)(aa) rejected - applicant-company is incorporated u/s. 25 of the Companies Act - Held that:- The decision of the Tribunal, Mumbai Bench in the case of CEO Clubs India Vs DIT [2012 (10) TMI 895 - ITAT MUMBAI] is worth mentioning wherein the assessee was incorporated as a Pvt. Ltd. Company u/s. 25 of the Companies Act. The assessee submitted that it was a non-profit association registered as such u/s. 25 of the Companies Act for a charitable purpose.
In that case also the DIT was not satisfied with the claim of the assessee holding that the objects as spelled out were clearly not for the benefit of public as a whole but rather are confined to specific members only and the Tribunal at para-9 of its order following the decision of the Hon’ble Supreme Court in the case of Surat Art Silk Cloth Manufacturers Association (1979 (11) TMI 1 - SUPREME Court) has held that object which seeks to promote or protect the interest of a particular trade or industry are object of public utility and finally held that the objection of the DIT for denying registration on this ground is therefore found to be without any basis. Considering the similarity in the facts of the case in hand with the facts of the judicial decisions referred to hereinabove, we are of the considered opinion that the DIT (Exem) have grossly erred in rejecting the application of registration. We, therefore, set aside the order of the DIT (Exem.) and direct him to grant registration to the applicant company. - Decided in favour of assessee.
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2015 (10) TMI 2416 - ITAT BANGALORE
Carry forward of excess expenditure of earlier years against the current year income - Held that:- The principle that the loss incurred under one head can only be set off against the income from the same head is not of any relevance, if the expenditure incurred was for religious or charitable purposes, and the expenditure adjusted against the income of the trust in a subsequent Year, would not amount to an incidence of loss of an earlier year being set off against the profit of a subsequent year.
The object of the religious and charitable trust can only be achieved by incurring expenditure and in order to incur that expenditure, the trust should have an income. So long as the expenditure incurred is on religious or charitable purposes, it is the expenditure properly incurred by the trust, and the income from out of which that expenditure is incurred, would not be liable to tax. The expenditure, if incurred in an earlier year is adjusted against the income of a later year, it has to be held that the trust had incurred expenditure on religious and charitable purposes from the income of the subsequent year, even though the actual expenditure was in the earlier years, if in the books of account of the trust such earlier expenditure had been set off against the income of the subsequent year. The expenditure that can be so adjusted can only be expenditure on religious and charitable purposes and no other. The High Court relied on the decision in the case of CIT Vs. Society of Sisters of ST. Anne (1983 (8) TMI 44 - KARNATAKA High Court). - Decided in favour of assessee.
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2015 (10) TMI 2385 - KARNATAKA HIGH COURT
Entitlement to carry forward and set-off of business loss - assessee not owning 51% voting powers in the company as per Section 79 of the Act by taking the beneficial share holding of M/s. Amco Properties & Investments Ltd. - Held that:- Dealing with a case under Section 79(a) and (b) of the unamended Section [Clause (b) was deleted w.e.f. 01.04.1988] and while relating to Clause (a) of Section 79 of the Act, the Apex Court in Commissioner of Income Tax V/S Italindia Cotton Private Limited (1988 (9) TMI 1 - SUPREME Court), held that the Section would be applicable only when there is change in shareholding in the previous year which may result in change of control of the Company and that every such change of shareholding need not fall within the prohibition against the carry forward and set-off of business losses. In the present case, though there may have been change in the shareholding in the assessment year 2002-03, yet, there was no change of control of the Company, as the control remained with the ABL as the voting power of ABL, along with its subsidiary Company APIL, remained at 51%. The Supreme Court further observed that the object of enacting Section 79 appears to be to discourage persons claiming a reduction of their tax liability on the profits earned in the Companies which had sustained losses in earlier years. In the present case, the control over the Company, with 51% voting power, remained with ABL and, as such, in our view, the provisions of Section 79 of the Act would not be attracted. - Decided in favour of assessee.
Entitlement to claim deduction in accordance with Section 35AB - transfer of technical knowhow, which amount was payable in installments between 31.5.1998 to 31.5.2006 - Held that:- The assessee would be entitled to claim deduction in accordance with Section 35AB of the Act in respect of sum of ₹ 5 Crores for transfer of technical know-how, even though the amount was payable and paid in instalments on subsequent dates. This we say so, also because the law is well settled that while interpreting the provisions of taxing statutes, where two views are possible, the one which is in favour of the assessee should be adopted. - Decided in favour of assessee.
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2015 (10) TMI 2384 - MADHYA PRADESH HIGH COURT
Deduction u/s 80IB (10) (a) - whether the stipulation in Section 80IB(10)(a) of completion certificate issued by the Local Authority before the cut off date, cannot be applied in the case of assessee following the work in progress accounting method? - Held that:- Issuance of completion certificate, after the cut off date by the Local Authority but, mentioning the date of completion of project before the cut off date, does not fulfil the condition specified in clause (a) of Section 80IB (10) read with Explanation (ii) thereunder. We reject the argument of the assessee that the effect of amended clause (a) of sub-Section 10 of Section 80IB, which has come into force with effect from 1st April, 2005, has retrospective effect or that it is unjust in any manner or incapable of compliance at all. Similarly, the requirement of securing completion certificate issued by the Local Authority before the cut off date is not directory, in view of the express provision in Section 80IB(10)(a) and the Explanation (ii) thereunder. The completion certificate granted by the Local Authority must bear the date of having been issued before the cut off date.
The provision in the form of Section 80IB(10)(a), applies uniformly to all the assessees - be it following work in progress accounting method or otherwise. The benefit of deduction under this provision can be availed by the assessee following the work in progress accounting method, provided he has complied with the stipulation of having produced completion certificate issued by the Local Authority before the cut off date, as may be applicable in his case. In other words, if the housing project was approved by the Local Authority before 1st April, 2004, he must submit completion certificate issued by the Authority having been issued before the 31st March, 2008. Whereas, in the case of housing project approved on or after 1st April, 2004, the assessee can avail of the benefit provided completion certificate issued by the Local Authority is within four years from the end of the financial year in which the concerned housing project was approved by the Local Authority. If this condition is not fulfilled, the assessee who maintains work in progress accounting method and has claimed deduction under Section 80IB(10)(a) must suffer the consequence of disallowance or withdrawal of the benefit claimed by him on that count. Thus the decision of the Assessing Officer to disallow deduction under Section 80IB(10)(a) of the Income Tax Act is upheld. - Decided against assessee.
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2015 (10) TMI 2383 - DELHI HIGH COURT
Reopening of assessment - AO received information from the Enforcement Directorate (ED) that in the books of the Assessee there were huge cash deposits - Held that:- The nature of the information provided by the governmental agency in that case did not itself refer to any amounts or entries in the books of accounts of the Assessee. In the present case, however, the information received from the ED makes a reference to what was found in the books of accounts of the Assessee.
The next question that had to be examined by the AO was whether what was disclosed in the books of accounts was also disclosed in the returns filed by the Assessees. If it was not disclosed, then possibly the AO could have reasons to believe that the cash deposits reflected in the books of accounts may have escaped assessment. However, no effort appears to have been made by the AO to examine the returns filed by the Assessee in either of these cases.
As far as RL Travels is concerned, the further information concerning payments made to third parties, which were unable to be verified by the ED, also required to be assessed by the AO by examining the returns filed to discern whether the said transaction was duly disclosed by the Assessee. It is the treatment of the entries in the books of accounts in the returns filed by the Assessee that would be determinative of whether in fact there was any concealment of relevant information or whether any income had in fact escaped assessment.
With the AO in either of these cases not having adopted that approach, it could not be said that the jurisdictional requirement of the AO having to form reasons to believe on the basis of some tangible material that income had escaped assessment was fulfilled.Consequently, the Court finds no error having been committed by the ITAT in the impugned orders in coming to the conclusion that the reopening of the assessments was bad in law. - Decided in favour of assessee.
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2015 (10) TMI 2382 - GUJARAT HIGH COURT
Re-opening of assessment - interest free loan to the partners who were also partners of Gujarat Tea Limited - Held that:- From the material on record and even show cause notice / queries / questionnaires and the reply of the asssessee, it appears that as such there was no inquiry and / or application of mind by the AO with respect to interest free loan to the partners and / or any query with respect to the interest on the amount advance to the partners, more particularly, with respect to reasons recorded while reopening of the assessment. Whatever the question that was with respect to interest paid to Jivraj Tea Limited and the petitioner assessee was requested to show cause as to why the interest paid to Jivraj Tea Limited disallowed and even assessee also replied to the same.
AO at the time of framing original assessment did not address himself with respect to interest free loan paid to the partners and with respect to the case on the disallowance to the interest at the rate of 12% p.a. on the amount advance to the partners. Under the circumstances, it cannot be said that reopening of the assessment for AY 2009-10 is mere change of opinion of the AO. It is required to be noted that reopening of the assessment is within the period of four years. Having reasons to believe that assessee had used interest bearing funds for non business purpose by giving interest free loans to its partners and therefore, interest expenses corresponding to the interest chargeable on the amount so diverted to the partners of the assessee firm for non business purposes has escaped assessment in the hands of the assessee firm within the meaning of Section 147 of the Act and having so satisfied when the impugned notice under Section 148 of the Act has been issued, it cannot be said that the AO has committed any error and / or illegality and / or assumption of jurisdiction by the AO to reopen the assessment for AY 2009-10,is invalid and / or not justified. - Decided against assessee.
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2015 (10) TMI 2381 - BOMBAY HIGH COURT
Expenditure on medical treatment of eyes for improving the vision - whether a business expenditure u/s 37 (1) ? - Held that:- We are not persuaded to accept the submission on behalf of the applicant that eyes are required to be exclusively used for the purpose of profession by the applicant. As observed above eyes are an important organ of the human body and is essential for the efficient survival of a human being. Eyes are thus essential not only for the purpose of business or profession but for purposes other than these which are so many. It is therefore clear that the said expenditure as claimed by the applicant is not in the nature of the expenditure wholly and exclusively incurred for the purposes of the profession of the applicant and thus this expenditure cannot be claimed by the applicant to be allowed as deduction in computing the income chargeable under the head profits and gains from business or profession in case of the applicant as per the provisions of Section 37 of the Act. - Decided in favour of revenue.
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2015 (10) TMI 2380 - DELHI HIGH COURT
Reopening of assessment - royalty payments received by the assessee from its Indian subsidiary (Oracle Indian Private Limited – OIPL) - INDIA USA DTAA - allegation of AO that since the assessee has a Permanent Establishment (PE) in India and that the receipts by the assessee from licensing of the duplicate software has been treated as "royalty" the "force of attraction rule" would be attracted and that the income in the nature of royalty should also be attributed to the Permanent Establishment by virtue of the said rule - whether as per Section 44D no expenses would be allowable and the receipts are to be taxed as royalty under section 115A @20% in place of 15% as was done and accepted in the assessment order - Held that:- In the present case, in the circumstances narrated above, it is evident that the when the Assessing Officer was examining the entire issue of royalty and its taxability the Assessing Officer must have examined Article 12 of the DTAA in its entirety, which also contained the exception mentioned in clause (6) thereof.
When a regular assessment is completed in terms of Section 143(3), a presumption can be raised that such an order has been passed upon a proper application of mind. See CIT vs. Kelvinator of India Ltd [2002 (4) TMI 37 - DELHI High Court] . Therefore, in our view, what the Assessing Officer is now seeking to do amounts to a clear change of opinion and that is not permissible.
The escapement of income by itself is not sufficient for reopening the assessment in a case covered by the proviso to section 147 of the said Act, unless and until there was failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment. It was also made clear that unless and until the recorded reasons specifically indicated as to which material fact or facts was/were not disclosed by the petitioner in the course of the original assessment under section 143(3), there could not be any reopening of assessment. See Swarovski India Pvt. Ltd. Vs. Deputy Commissioner of Income Tax (2014 (9) TMI 4 - DELHI HIGH COURT) - Decided in favour of assessee.
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2015 (10) TMI 2379 - PUNJAB & HARYANA HIGH COURT
Addition u/s 69 - Whether ITAT has erred in not appreciating that once the entries appearing on any seized document in the course of search are credible and shows that outstanding liability of the assessee amounting to ₹ 1,28,89,362/- was in respect of an investment and by virtue of section 69 of the Act should have been treated as income and could not have been restricted to part payment? - Held that:- CIT(A) restricted the addition of ₹ 59,43,115/- as against the addition of ₹ 1,28,69,362/- made by the Assessing Officer as the said amount depicted the payments actually made to Mr. Monga. The amount paid to Mr. Monga was to the tune to ₹ 46,43,115/- and the balance was shown as receivable by Mr. Monga and his family members from the assessee vide letter dated 10.08.2008. A sum of ₹ 13,00,000/- as mentioned in the said letter was also received by him. In totality thus the total payments made by the assessee to Mr. Monga were of ₹ 46,43,115/- + ₹ 13,00,000/- and the addition had been restricted to ₹ 59,43,115/-. The Assessing Officer had erred in making addition of ₹ 1,28,69,362/- to the income of the assessee. The balance amount payable by the assessee to Shri Monga and his family members which was shown in the books of account of the assessee as outstanding could not be termed as undisclosed income and included in the total income of the assessee. The CIT(A) and the Tribunal were right in sustaining the addition of ₹ 59,43,115/- in the hands of the assessee for the assessment year 2009-10. - Decided against revenue.
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2015 (10) TMI 2378 - ALLAHABAD HIGH COURT
Rectification of mistake - Search and seizure operation challenged - Held that:- The plea for the quashing of the assessment order was neither raised nor considered by the Court nor the amendment application was ever pressed. The reason for not pressing the application could be for a variety of reasons and one of them could be the plea of an alternative remedy, namely, an appeal before the first appellate authority against the assessment order. According to the respondents, an appeal had already been filed before the first appellate authority. Whatever may be the reason, the fact remains that the validity and legality of the assessment orders were never argued before the Court nor the amendment application was pressed.
There is no error apparent on the face of the record which requires reconsideration or rectification. Since the amendment application was not pressed, it was not open for the Court to consider the validity of the assessment orders so passed during the pendency of the writ petition.
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2015 (10) TMI 2377 - BOMBAY HIGH COURT
Short term capital gains - whether volume and frequency of trades indicated that the respondent was a trader? - Held that:- There are concurrent findings of facts recorded by the Commissioner of Income Tax (Appeals) and the Tribunal holding that the respondent-assessee is engaged in investment activities resulting in 'Short Term Capital Gains.' In fact in the preceeding Assessment year on identical facts the respondent-assessee 's claim for loss under the head 'Short Term Capital Gains had been accepted by the Assessing Officer. The view taken by the Tribunal upholding the order of the CIT (A) confirming the fact of short term capital gains - Decided against revenue.
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2015 (10) TMI 2376 - ITAT PUNE
Adjustment made on account of arm's length price of interest receivable transaction from the Netherland based associate enterprise company - Held that:- Hon’ble Bombay High in Court CIT Vs. Tata Autocomp Systems Ltd. (2015 (4) TMI 681 - BOMBAY HIGH COURT ) has held that while computing arm's length price of international transaction, where the assessee had advanced loan to its associate enterprises situated in Germany, then the rate of interest was to be determined on the basis of rate prevailing in Germany, where the loan had been consumed and not to be determined on the basis of rate prevailing in India. The issue arising in the present appeal is identical to the issue before the Tribunal in assessee’s own case relating to assessment year 2008-09 and before the Hon’ble Bombay High Court in CIT Vs. Tata Autocomp Systems Ltd. (supra) and following the same parity of reasoning, we direct the Assessing Officer to re-compute arm's length price of international transaction entered into by the assessee with its associate enterprises, following the directions in our earlier year. The learned Authorized Representative for the assessee pointed out that though in the earlier, there was discrepancy in the picking up of figure interest receivable from associate enterprises, but in the year under appeal, there is no such issue. Decided in favour of assessee.
Disallowance of additional depreciation under section 32(1)(iia) of the Act on items of fixed assets - Held that:- We direct the Assessing Officer to allow the additional depreciation under section 32(1)(iia) of the Act on trolley and industrial fans - Decided in favour of assessee in part
Deduction claimed on account of payments to PF / ESCI - Held that:- Perusal of the details tabulated in assessment order reflect that the payments have been made by the assessee within a delay of few days and much before the due date of filing the returns. Following the ratio of CIT Vs. Ghatge Patil Transports Ltd. (2014 (10) TMI 402 - BOMBAY HIGH COURT ), we hold that the assessee is entitled to the claim of deduction in this regard. Accordingly, we direct the Assessing Officer to disallow the addition - Decided in favour of assessee
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2015 (10) TMI 2375 - ITAT MUMBAI
Disallowance u/s 14A - Held that:- Already DRP has taken note of the fact that; firstly, Rule 8D is not applicable in this year; and secondly, there is no interest expenditure attributable for the earning of exempt income; and lastly, for the purpose of indirect expenses, already direction have been given to the AO to identify the manpower cost of the persons directly concerned with the making of the decision of the investments and to work-out the disallowance. The AO after analyzing the entire details has restricted the disallowance at ₹ 1 lakh on account of manpower / administrative cost, which can be said to be attributable for earning of exempt income. Such a finding of AO cannot be faulted with in absence of any proper rebuttal and also the disallowance as it is appears to be quite reasonable. Thus on the facts if the case, disallowance u/s 14A as restricted after DRPs direction is confirmed - Decided against asseessee.
Depreciation allowance on purchase of printers and UPS - Held that:- So far as claim of depreciation on UPS and printer is concerned the same is to be allowed @ 60% as they are part and parcel of computer itself and are peripheral component/equipment connected with the computer. In the decision of Omini Club Informational Technology Ivt P Ltd. [2010 (4) TMI 769 - ITAT, DELHI] and also in catena of other decisions by the co-ordinate Benches of the Tribunal there has been a consistent view that printer and UPS are part of computer and hence depreciation has to be allowed @ of 60%. However, so far as claim of depreciation on air-conditioners installed in server’s room, the same cannot be treated as part of computer and therefore, restricting the claim of depreciation @ 15% by the AO is fully justified - Decided partly in favour of assessee.
Disallowance of software expenses incurred on purchase of printer-server software - Held that:- Of the expenditure incurred on the software is to facilitate the assessee’s business or enable the management to conduct the business more efficiently or profitably, then it has to be treated as revenue expenditure. In all these cases, the expenditure incurred on the software expenses were allowed as revenue expenditure. Here also, the software purchase for print server is nothing but to facilitate the assessee’s business and to conduct day-to-day activity in an efficient manner and, therefore, it has to be allowed as revenue expenditure. Thus, following the principle and ratio laid down in the case of CIT vs Raychem RPG Ltd [2011 (7) TMI 953 - Bombay High Court] and CIT vs Amway India Enterprise [2011 (11) TMI 4 - DELHI HIGH COURT] we allow the claim incurred on print software as revenue expenditure - alternate contention of allowing depreciation @ 60%, in case it is treated as capital expenditure have been rendered purely academic - Decided in favour of assessee
Addition on account of “container detention charges (CDC) - collection by the assessee on behalf of the principal and retained in terms of RBI direction, which has been treated as income accrued to the assessee during the year by the AO - Held that:- The assessee has offered the entire amount of CDC charges collected right from year 1993 to December, 2008 as income and paid the entire taxes in AY 2010-11. This has been done so only when the principal had written a letter dated 25th May, 2009, whereby, the principal has authorized the assessee to retain the CDC charges collected on its behalf right from period 1st April, 1993 to 31st March, 2009. By virtue of this letter, the principal has authorized its agent to treat the amount as agent’s income. Hence forth, now it can be held that this income belongs to the agent and hence it has been rightly taxed by the Department in the AY 2010-11. Thus, on these facts and circumstances, we hold that the taxing of CDC charges in AY 2007-08 or 2008-09 is not sustained and is uncalled-for. Therefore, the additions made by the AO are deleted. - Decided in favour of assessee.
Transfer pricing adjustments - Held that:- Wuhu Cold Storage and Transportation Co. is a complete service provider, whereas, the assessee is more of service recipient of such activities. Once it has been found that this comparable is performing activities and functions which are different from the functions carried out by the assessee, then without there being any change in the facts and circumstances in this year, the said company cannot be held to be a good comparable in this year. Simply the assessee has included this comparable in Transfer Pricing Study Report in this year as well as in the earlier years, it does not preclude the assessee from raising the objection that the said comparable cannot be included in this year, if the assessee is able to demonstrate the factors and circumstances leading to its exclusion, specifically functional dissimilarity and also the factors leading to huge variation in profit margin. Here in this year, the assessee before the TPO as well as before the DRP has disputed the comparable based on high margins. This plea of the assessee has been accepted by the department in the subsequent year. Thus, following subsequent order of the DRP, we exclude the Wuhu Cold Storage and Transportation Co. from the list of final comparables. Accordingly, the Assessing Officer is directed to exclude the same and benchmark the average margin of other comparables with that of the assessee and if the margin of such comparables falls within the range of ± 5% of the Arm’s length price, then needless to say, no adjustment should be made - Decided partly in favour of assessee.
Disallowance of claim of expenditure on account of feasibility study - Held that:- The assessee has made the payment to professional firm, McKinsey & Co. for conducting a Feasibility Study Report for establishing a BPO business for assessee’s own function. Nothing has been brought on record that some kind of new line of business was to be set up or was to be controlled by different management. Hence, it cannot be treated as capital expenditure, or for non business purpose or any kind of pre-operative expenses. Here in this case, BPO business could not take off and whatever expenditure has been incurred has to be allowed either as business expenditure or as a business loss incurred during the course of business. Thus, the claim of such an amount cannot be disallowed either as a capital expenditure or for non-business purpose
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2015 (10) TMI 2374 - ITAT RAJKOT
Taxability of profits from operation of ships in international traffic - benefits of India UAE Double Tax Avoidance Agreement - Held that:- Assessing Officer was clearly in error in invoking the provisions of Article 29 on the facts of this case. The conditions precedent for invoking this provision, i.e. creation of the assessee entity wholly or mainly, to obtain the benefits of the India UAE tax treaty which “would not be otherwise available”, could not have been fulfilled on the facts of this case as the assessee was anyway liable for treaty protection of its India sourced income from operations of ships in international traffic whether the business was carried out from Switzerland or from UAE and irrespective of the fact whether owner of the vessel was in Marshall Islands or anywhere else.
The apprehensions raised by the Assessing Officer are devoid of any legally sustainable basis and are not supported by any cogent material. The LOB clause, as set out in article 29 of the India UAE treaty, as see have seen earlier in this order, could not have been invoked on the facts of this case either. In such a situation, once there is reasonable evidence to suggest that the affairs of the company are conducted from UAE, as is the case before us, and there is no material to controvert the same or to establish that the company is controlled or managed from outside UAE, learned CIT(A) was indeed quite justified in reversing the action of the Assessing Officer and in granting the benefits of India UAE tax treaty.
The profits arising out of operations of ship in question in international water, by the appellant is not subject to taxation in India due to applicability of Article 8 read with Article 4 of India-UAE DTAA. - Decided in favour of assessee.
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2015 (10) TMI 2373 - ITAT PUNE
Loss in share business claimed as business loss - treated as speculative loss in terms of Explanation to section 73 by the Revenue - Held that:- From the perusal of the CIT Vs. Darshan Securities (P.) Ltd. [2012 (2) TMI 117 - BOMBAY HIGH COURT] it is evident that Explanation to section 73 cannot be invoked only for the reason that the assessee is engaged in the share trading activity and does not fall within the exceptions laid down therein. Before applying deeming provisions and explanations to the sections, it is essential to refer to substantive provisions of the Act. Thus, we are of the considered view that the case of the assessee is squarely covered by the judgment of Hon'ble Bombay High Court. Accordingly, this ground of appeal of the assessee is accepted. - Decided in favour of assessee.
Accrual of Interest - AO held to be taxable in impugned assessment year whereas the assessee has claimed the same in assessment year 2009-10 and the TDS certificate have also been issued in the assessment year 2009-10 - Held that:- The assessee is following mercantile system of accounting and recognizing the revenue on accrual basis. Since, the interest has accrued to the assessee in the period relevant to assessment year 2008-09, the same has to be taxed in the relevant assessment year. However, we find force in the submissions of the assessee that once income has been offered to tax in assessment year 2009-10 and the tax has been paid thereon the same income should not be taxed twice. The addition of ₹ 3,81,863/- with regard to the interest income received by the assessee in the impugned assessment year is sustained. The Assessing Officer is directed to delete the interest income that has been added in assessment year 2008-09 from the income of assessee in assessment year 2009-10. This ground of appeal of the assessee is partly accepted.- Decided in favour of assessee in part.
Interest on borrowed funds allegedly diverted by the assessee for non-business purposes disallowed u/s. 36(1)(iii) - contention of the assessee is that the assessee has diverted borrowed interest bearing funds for non-business purposes - Held that:- Although, the ld. AR has argued that the assessee has sufficient own funds but at the same time has also conceded that proportionate disallowance can be made by considering the availability of own funds. We remit, this issue back to the file of the Assessing Officer to decide this ground afresh after taking into consideration the availability of own funds and the use of same for advancing loans for non-business purposes.- Decided in favour of assessee by way of remand.
Commission paid to M/s. Eagle King Investments Development Ltd., Singapore disallowed - no TDS was deducted thereon - Held that:- It is a well settled law that if the payment made is commission simpliciter, for the services rendered abroad to an overseas concern having no PE in India, such payment is not taxable. Since, the income accrued to the overseas non-resident concern is not taxable, there is no question of deduction of tax at source on the said payments. Our view is supported by the judgment of the Hon'ble Madras High Court in the case of CIT Vs. Faizan Shoes Pvt. Ltd. reported as (2014 (8) TMI 170 - MADRAS HIGH COURT). We remit this issue back to the Assessing Officer for re-examination. In case the assessee is able to show that the payments were made through proper banking channel for the services rendered abroad, the payments were in the nature of commission and the overseas concern has no PE in India, the Assessing Officer shall allow the same. - Decided in favour of assessee for the statistical purpose.
Disallowance made u/s. 14A r.w. Rule 8D on shares held as stock-in-trade - Held that:- It is an undisputed fact that the shares are held by the assessee as stock-in-trade. The assessee has earned dividend income on such shares. The assessee has not held the shares for earning dividend income. Dividend income is incidental to the share trading business of the assessee. Thus, no disallowance u/s. 14A is warranted on dividend earned on shares held as stock-in-trade. Our view is fortified by the decision of Mumbai Bench of the Tribunal in the case of DCIT Vs. M/s. India Advantage Securities Ltd. [2012 (11) TMI 458 - ITAT, MUMBAI]. Also see CCI Ltd. Versus Joint Commissioner of Income-tax [2012 (4) TMI 282 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
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2015 (10) TMI 2372 - ITAT HYDERABAD
Claiming the balance amount of discount also as expenditure of the year u/s 37(1) - Held that:- Hon’ble Supreme Court in the case of Madras Industrial Investment Corporation Vs. CIT [1997 (4) TMI 5 - SUPREME Court], which is directly applicable to the facts of the case as considered by the Ld. CIT(A). Moreover, the judgment in the case of Taparia Tools Limited Vs. JCIT, Nasik (2015 (3) TMI 853 - SUPREME COURT) is under the provisions of Section 36(1)(iii) whereas the decision of the Hon’ble Supreme Court in the case of Madras Industrial Investment Corporation Vs. CIT [1997 (4) TMI 5 - SUPREME Court] is directly U/s. 37(1) and that too on the issue of discount on debentures. Since there is a direct judgment of the Hon’ble Supreme Court covering the facts of the case, we do not see any reason to interfere the order of the Ld. CIT(A). This is also in tune with the claim of ‘premium’ considered in later grounds, principles being same. Accordingly, we uphold the spreading over of the discount on debentures over period of debentures i.e., five years. Accordingly, we uphold the allowance of 1/5th of the discount only in the year under consideration - Decided against assessee.
Issue of claim of ‘premium’ which was disallowed U/s. 40(a)(ia) - Held that:- Even if the amount is credited to Suspense A/c, but is claimed in the Books of Accounts of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of payee and the provisions of this Section shall apply accordingly. There is no dispute that assessee has provided the amount in the Books of Accounts and also claimed in the P&L A/c as an expenditure. Consequently, the credit of such in books of account shall be deemed to be income to the account of payee and provisions of Section 194A do apply to the facts of present case. Consequently, for the failure of deduction of tax at source, we are of the opinion that amount is disallowable under the provisions of Section 40(a)(ia). - Decided against assessee.
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2015 (10) TMI 2371 - ITAT CHANDIGARH
Revision u/s 263 - Assessing officer has accepted VDIS claim without enquiry - Held that:- It is a matter of fact that the Assessing officer being an adjudicating officer has to form an opinion on the basis of evidence, which he has duly done. If the Ld. CIT on the same set of evidence forms an opinion, it being a question of fact, does not given him jurisdiction to revise the same u/s 263 of the Act. This is certainly a case of difference of opinion between Assessing officer and CIT. The only contention of the CIT seems that the Assessing officer should have made further enquiries / investigation, which he has not done. However, for assuming jurisdiction u/s 263, one has to keep in mind the distinction between lack of inquiry and inadequate enquiry. If there was an enquiry, even inadequate, that would not by itself give occasion to the CIT to pass order u/s 263, merely because he has a different opinion in the matter. It is only in case of 'lack of inquiry' that such a cause of action could be open. Assessing officer called for action, assessee replied to the Assessing officer, Assessing officer accepted and even in the office note meant for internal purposes he mentions that the assessee has substantiated the jewellery seized. In view of these evidences, this is not a case of lack of inquiry either.
In view of the above analysis, we do not find any error in the order of Assessing officer. Hence, we set aside the order of Ld. CIT made u/s 263 of the Act as the order of the Assessing officer is not found to be erroneous. - Decided in favour of assessee
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