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Income Tax - Case Laws
Showing 61 to 80 of 508 Records
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2021 (11) TMI 1093 - CALCUTTA HIGH COURT
Faceless assessment - validity of Order u/s 144 r.w.s. 254 and 144B - allegation of violation of principles of natural justice by way of not affording effective opportunity of hearing to the petitioner and not allowing him to file relevant documents in spite of repeated requests - HELD THAT:- Inability on the part of the petitioner to file relevant documents due to technical glitches in the portal system of the Income Tax Department over which he has got no control and to establish these facts of facing of technical glitches petitioner has annexed series of documents annexed to the writ petition from time to time and correspondences made to the department bringing it to the notice of the department of its grievance.
Respondent is not in a position to contradict these allegations which are matters of records and part of the writ petition as annexures.
Considering the submissions of the parties no purpose will be served by keeping the writ petition pending and interest of justice will be served if the impugned assessment order dated 26th September, 2021 is set aside with the direction upon the respondent assessing officer to pass a fresh assessment order after affording effective opportunity of hearing to the petitioner and by observing principles of natural justice preferably within two months from date.
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2021 (11) TMI 1090 - ITAT DELHI
TP Adjustment - comparable selection - Functional dissimilarity - HELD THAT:- LARSEN & TOUBRO INFOTECH LTD. (L&T) - In view of the facts inter alia that L&T is into various segments having no segmental financials, having huge brand value and intangibles is not a suitable comparable vis-à-vis taxpayer which was working as a captive entity and that contention raised by the DR that under TNMM minor dissimilarities do not affect the overall comparability is not sustainable because though it is a taxpayer’s own comparable but there being no estoppel against statute and that taxpayer can rectify its mistake at any stage of the proceedings.
Secondly, it is not a case of minor dissimilarities rather it is a case of functional dissimilarity and non-availability of segmental financials to provide the clear picture qua profit earned by the company from provisions of SDS. L&T is a big brand having ownership of huge intangibles which ought to provide competitive advantage to the taxpayer in the form of premium pricing and huge volume of business ultimately leading to the higher profitability. So, we are of the considered view that L&T is not a suitable comparable vis-à-vis the taxpayer, hence ordered to be excluded.
Tata Elexi - We are of the considered view that on account of functional dissimilarity and having ownership of internally generated intangibles in the form of technical know-how for rendering services to its customers make Tata Elexi not a suitable comparable vis-à-vis the taxpayer who is a routine software development service provider working on cost plus markup model having no intangibles of its own, hence we direct to exclude Tata Elexi from the final set of comparables.
Cybercom Datamatics leads to the conclusion that it is into diversified services and is also a product company providing software development to its associated enterprises and also selling developed software product whereas the taxpayer is a routine software development services provider working on a cost plus mark-up model and as such its margin cannot be compared with Cybercom Datamatics, hence Cybercom Datamatics is ordered to be deleted as a comparable.
Cigniti has been excluded in a number of cases by the coordinate Bench of the Tribunal vis-à-vis the routine software development service provider on account of functional dissimilarity as it provides specialized services in the field of software testing, hence we find Cigniti not a suitable comparable vis-à-vis the taxpayer. Accordingly, it is ordered to be excluded.
Kelton is not a suitable comparable vis-à-vis the taxpayer being into diversified nature of services having no financial segmental to arrive at the proper margin, also being into development of various products and mobile apps and having own intangibles and softwares giving it edge over other players in the field as against the taxpayer who is a routine software development services provider working on cost plus mark-up, hence ordered to be excluded.
Thirdware is functionally dissimilar vis-à-vis the taxpayer as it has been deriving income from sale of licence and software services export from SEZ unit and revenue from subscription and training etc. and it is also into sale of licence and its segmental financials are not available.
Infobeansis providing wide range of services under four verticals i.e. services, automation, enterprise and industries and under the automation services verticals, the company is providing advanced robotic process automation services. Since Infobeans is into diversified activities it cannot be a suitable comparable vis-à-vis the taxpayer which is a routine software development services provider.
Inteq is not a suitable comparable vis-à-vis the taxpayer which is a routine software development service provider working on cost-plus mark up model, hence ordered to be excluded from the final set of comparables.
Adjustment on account of outstanding receivables - Delay in receipt of the receivables qua transactions undertaken with unrelated parties - TPO recharacterized the delay in receipt of receivables as unsecured loans advanced to the AE and attributed a notional interest @ 4.485% being Libor + 400 BPS on the period of delay exceeding 30 days - HELD THAT:- Since the taxpayer has not incurred any interest cost nor has availed of any loan from AE or unrelated third parties, as is evident from audited financials at pages57 & 66 of the paper book, proposed adjustment on account of delay in receipt of receivables by the TPO/DRP is not sustainable, hence ordered to be deleted. Consequently, grounds determined in favour of the taxpayer.
Non granting credit of Tax Deducted at source (TDS) in respect of amalgamating companies - HELD THAT:- When TDS has been deducted AO has no option but to grant the credit thereof to the taxpayer. So, we direct the AO to give credit of TDS deducted in respect of amalgamating companies, namely, IP Unity Communications Ltd. and GL Software Ltd. after due verification. Consequently, ground determined in favour of the taxpayer in accordance with law.
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2021 (11) TMI 1088 - ITAT PUNE
Depreciation claimed on the asset " Right to Collect Toll" - commercial right or intangible asset - true nature of the rights acquired in terms of the contract awarded by the NHAI - Whether the asset on which depreciation has been claimed, does not form part of intangible asset defined u/s 32(1)(ii) - whether or not the cost of “Right to Collect Toll” qualifies as intangible asset as defined under clause (ii) of sub-section (1) of section 32? - HELD THAT:- There can be no doubt that as result of developing this project, the respondent-assessee had acquired a commercial right to collect the toll in terms of the contract awarded by NHAI. This right definitely falls within the meaning of “commercial right” or “intangible asset”. This definitely would qualify for depreciation @ 25%.
To the same effect is the decisions of the Hon’ble Rajasthan High Court in the case of GVK Jaipur Expressway Ltd.[2017 (10) TMI 1380 - RAJASTHAN HIGH COURT] the High Court has taken into consideration all the decisions and more particularly the decisions of (i) Hon’ble Delhi High Court in the case of Moradabad Toll Road Co. Ltd.[2014 (11) TMI 354 - DELHI HIGH COURT] (ii) Hon’ble Allahabad High Court in the case of CIT v. Noida Toll Bridge Co. Ltd.[2012 (11) TMI 556 - ALLAHABAD HIGH COURT]; (iii) Hon’ble Madras High Court in the case of CIT v. VGP Housing (P.) Ltd.[2014 (8) TMI 423 - MADRAS HIGH COURT]; (iv) Hon’ble Rajasthan High Court in the case of CIT v. Jawahar Kala Kendra [2014 (6) TMI 292 - RAJASTHAN HIGH COURT] (v) Hon’ble Rajasthan High Court in the case of CIT v. Mohd. Bux Shokat Ali [2001 (2) TMI 26 - RAJASTHAN HIGH COURT] (vi) decisions of the Hon’ble Jurisdictional High Court in the case of North Karnataka Expressway Ltd. [2014 (11) TMI 351 - BOMBAY HIGH COURT]; (vii) CIT vs. West Gujarat Expressway Ltd. (No.1) [2016 (4) TMI 1184 - BOMBAY HIGH COURT] and (viii) CIT vs. West Gujarat Expressway Ltd [.2016 (4) TMI 1220 - BOMBAY HIGH COURT] have no application to the facts of the present case, inasmuch as, the decision in the said two cases relates to the allowability of depreciation on roads treating as building. In the circumstances, we do not find any illegality in the order of the ld. CIT(A). Accordingly, we do not find any merit in the appeal filed by the Revenue. Hence, the grounds of appeal raised by the Revenue are dismissed.
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2021 (11) TMI 1087 - ITAT MUMBAI
Rectification of mistake u/s 154 - amounts with respect to interest income, commitment fees and agency income - HELD THAT:- We deem it fit and proper to rectify the quantum of interest income, commitment fees and agency fees. Ordered, accordingly. The impugned order dated 4th December 2020 stands rectified accordingly.
Ground nos. 9 and 10 remained indisposed off - DR fairly agrees that the above grounds have remained to be disposed of, but, as for the arguments as merits his suggestion is that these submissions can only be taken up for hearing when recalled matter comes up for hearing when recalled matter comes up for hearing. Learned counsel for the assessee does not oppose the said suggestion.
Having regard to the rival submissions, and having perused the material on record, we are satisfied that ground nos. 9 and 10 have remained to be disposed of and the impugned order needs to be recalled accordingly. We order so. The Registry is directed to refix the matter for the limited purposes of disposing of these two grounds of appeal.
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2021 (11) TMI 1081 - ITAT KOLKATA
Disallowance u/s 14A r.w.r 8D - assessee earned exempt dividend income and offer suo-moto disallowance while computing the income - CIT(A) deleted the additional disallowance by observing that AO was duty bound to record his dissatisfaction about the computation of disallowance made by the assessee - HELD THAT:- We find that besides the observation of Ld. CIT(A) in the impugned order, the disallowance is not sustainable for two reasons. Firstly, the suo-moto disallowance as offered by the assessee was more than the exempt income. Secondly, as per settled legal position, only those investments were to be considered which had actually yielded any exempt income during the year. The suo-moto disallowance offered by the assessee was in accordance with law. Therefore, finding no reason to interfere in the impugned order on this issue, we dismiss the ground raised by the revenue.
Disallowance u/s 43B (Employer’s contribution to Gratuity Fund) - Disallowance u/s. 43B(b) as per the observation of Tax Auditor that there was non-payment of Employer’s contribution to approved Gratuity Fund - CIT(A) deleted the same by observing that the same was already disallowed by the assessee in the computation of income and further disallowance would amount to double addition - we direct Ld. AO to verify the observation and delete the disallowance. This ground stand allowed for statistical purpose.
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2021 (11) TMI 1080 - ITAT MUMBAI
Penalty u/s 271(1)(c) - Estimation of income on bogus purchases - HELD THAT:- Hon'ble Delhi High Court in the case of CIT v. Aero Traders Pvt. Ltd. [2010 (1) TMI 32 - DELHI HIGH COURT] affirmed the order of the Tribunal in holding that estimated rate of profit applied on the turnover of the assessee does not amount to concealment or furnishing inaccurate particulars. Also see SHRI DEEPAK POPATLAL GALA & OTHERS [2015 (6) TMI 944 - ITAT MUMBAI]
In the case on hand the Ld. Assessing Officer and Ld.CIT(A) as well has only estimated the Gross Profit on the alleged non-genuine purchases without there being any conclusive proof of concealment of income or furnishing inaccurate particulars of such income. Thus, respectfully following the above decisions, we direct the assessing officer to delete the penalty levied u/s.271(1)(c) of the Act for the Assessment Year under consideration. - Decided in favour of assessee.
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2021 (11) TMI 1077 - ITAT DEHRADUN
Taxation u/s 44BB - receipts out of the contracts executed to various drilling offshore contractees along with ONGC - nature of the activities and scope of work of the contract - AO held that the contracts receipts are to be treated as Fee for Technical Services (FTS) in respect of equipment rental hire and claim of Section 44BB was denied and taxed the amount u/s 44DA - distinction between PSC and non-PSC partners for deciding whether a receipt would be assessed u/s 44BB or as FTS or Royalty - HELD THAT:- Such a distinction has to be rejected as an artificial construct devoid of merit. Secondly, it also cannot be accepted that similar kinds of services can be taxed u/s 44BB of the Act if rendered to a PSC and thereafter, sought to be taxed as FTS or royalty if rendered to a non-PSC partner. The plethora of case laws cited by the ld. ARs and especially the case of CGG Veritas [2012 (4) TMI 280 - ITAT DELHI makes it clear that once a PE is known or admitted to exist then the income as in this case, has to be assessed u/s 44BB of the Act more so because the equipment supplied and services rendered are for the purposes of extraction or production of mineral oils. Thirdly, treating of supply of skilled personnel to operate equipment supplied by the assessee cannot be viewed in isolation since the activity of supplying such manpower is part and parcel of the supply of equipment to be used for extraction or production of mineral oils. For this reason also, the income has to be assessed u/s 44BB of the Act only.
We also find that preferring appeal by the Revenue against the decision of the Hon’ble High Court in the case of M/s BJ Services Co. (ME) Ltd.[2007 (10) TMI 219 - UTTARAKHAND HIGH COURT] cannot be a ground for confirming the appeal. Till the decision is reversed, the order of the Hon’ble High Court stands legally binding.
Profits Attributable on revenues – 5.08% or 2% - While arriving at 5.08%, the ld. CIT(A) has rejected KOA Tools Limited as a comparable company on account that it incurred losses - HELD THAT:- The assessee relied on the ruling of the Special Bench of Chandigarh ITAT in the case of DCIT vs. M/s Quark Systems Private Limited [2009 (10) TMI 591 - ITAT, CHANDIGARH] wherein it was held that merely because a comparable is making loss, it cannot be excluded from the list of comparables, Imercius is a case in which not only functional area is different.
The above principle has also been upheld by other benches of ITAT in the case of UCB India (P) Limited [2009 (2) TMI 237 - ITAT BOMBAY-L], Wockhardt Limited [2010 (7) TMI 643 - ITAT, MUMBAI] , Brigade Global Services Private Limited [2014 (12) TMI 337 - ITAT HYDERABAD].
Thus we hold that Koa Tools India Limited which clears the FAR test should not be rejected as a comparable for the AY 2009-10.
Service Tax Reimbursement - AO treated service tax collected by the assessee as a part of its gross receipts - HELD THAT:- The issue under consideration has been recently adjudicated by the Uttarakhand High Court (Full Bench) in assessee’s own case and Others [2019 (4) TMI 1177 - UTTARAKHAND HIGH COURT] wherein the Uttarakhand High Court on similar facts has held that amount reimbursed to the assessee by ONGC representing service tax paid earlier by assessee to the Government of India and not “on account of provision of services in connection with exploration and production of mineral oil”, would not form part of aggregate taxable amount as referred under section 44BB.
Given the above reasons, the Division Bench held that reimbursement of service tax collected by the assessee should not be included while computing taxable gross receipts under section 44BB of the Act. Also see MITCHELL DRILLING INTERNATIONAL PVT. LTD. [2015 (10) TMI 259 - DELHI HIGH COURT] Hence, keeping in view, the pronouncements of the Hon’ble Court, we hold that the service tax cannot be made a part of the Gross turnover.
Revenue appeal dismissed.
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2021 (11) TMI 1076 - ITAT BANGALORE
TP Adjustment - contention of the assessee that the TPO conducted transfer pricing analysis on erroneous understanding of the business model of the assessee - HELD THAT:- This issue was there in the appeal for the assessment year 2014-2015, wherein the Tribunal in [2020 (2) TMI 1642 - ITAT BANGALORE] after examining the facts of the case, had accepted the contention of the assessee that the TPO conducted transfer pricing analysis on erroneous understanding of the business model of the assessee. Accordingly, the entire transfer pricing issue was set aside to the TPO with a direction that the transfer pricing analysis may be carried out having regard to the business model of the assessee
Since the facts for the assessment year 2015-2016 is identical to the facts considered by the Tribunal for assessment year 2014-2015, we restore the entire transfer pricing analysis for de novo consideration to the AO / TPO. It is ordered accordingly.
Interest on outstanding receivables - TPO computed the delayed trade receivables under the weighted average method. TPO by adopting the net interest rate of 4.38%, on average net receivables that is outstanding for the period exceeding 60 days, computed the interest adjustment on outstanding receivables - HELD THAT:- DRP has directed the TPO to re-work the interest computation based on the delay of individual invoices. However, the DRP has not complied with the directions of DRP. TPO was wrong in stating that the assessee did not furnish the invoice wise details of trade receivables. These details are furnished by the assessee vide its letter dated 24.10.2018 and are placed on record Volume-II. The assessee had given detailed submissions on the issue and the same has not been considered by the TPO. TPO is directed to re-work the interest computation based on the delay of individual invoice as per the directions of the DRP. It is ordered accordingly. In the result, grounds are allowed for statistical purposes.
Disallowance u/s 14A - HELD THAT:- It is settled position of law that if the assessee is not in receipt of any exempt income in the relevant assessment year, no disallowance u/s 14A can be resorted to. In this context, we rely on the judgment in the case of CIT v. Chettinad Logistics Pvt. Ltd. [2018 (7) TMI 567 - SC ORDER]. In light of the above judicial pronouncements, we hold that since the assessee was not in receipt of any exempt income during the relevant assessment year, the A.O. has erred in making disallowance u/s 14A .
Non-deduction of TDS on software expenses - AO disallowed software expenses u/s 40(a)(ia) by treating the same as “royalty”, hence liable for TDS - HELD THAT:- In view of the latest judgment in the case of Engineering Analysis Centre of Excellence Private Limited v.CIT & Anr. [2021 (3) TMI 138 - SUPREME COURT] we restore the issue to the files of the A.O. The A.O. is directed the examine whether expenses incurred for purchase of software is “royalty” and liable for deduction - A.O. is directed to follow the dictum laid down by the Hon’ble Apex Court in the case of Engineering Analysis Centre of Excellence Private Limited v.CIT & Anr. (supra).
Deduction u/s 10AA is to be allowed as assessed income - HELD THAT:- The Hon’ble jurisdictional High Court in the case of M Pact Technology Services Pvt. Ltd. [2018 (8) TMI 202 - KARNATAKA HIGH COURT] had held that deduction u/s 10AA of the I.T.Act should be computed on the assessed income and not on the returned income - we direct the A.O. to grant deduction u/s 10AA of the I.T.Act on the assessed income and not on the returned income. It is ordered accordingly.
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2021 (11) TMI 1073 - ITAT CHENNAI
Estimation of income - Bogus purchases - assessee is unable to justify various expenses including purchases with supporting evidence - CIT-A restrict the disallowance on purchases to the extent of 2.5% - HELD THAT:- AO had made adhoc disallowance on purchases without recording any adverse comments on books of accounts maintained by the assessee for the relevant assessment year - AO has not disputed pleading of the assessee that the auditor has given clean chit to the books of accounts maintained by the assessee and has not made any adverse comments on purchases debited into P&L account. Under these circumstances, we are unable to subscribe to the reasons given by the AO to make adhoc disallowance on purchases
CIT(A), after considering relevant facts and also taken note of fact that there is a decline in gross profit declared by the assessee for the impugned assessment year compared to earlier financial year, has directed the AO to restrict the disallowance on purchases to the extent of 2.5%, fall in rate of gross profit on total turnover for the year. The said findings recorded by the Ld. CIT(A) appears to be logical and on the basis of estimation of gross profit. Therefore, we are of the considered view that there is no error in the reasons given by the Ld. CIT(A) to sustain additions made by the AO towards disallowance on purchases on the basis of fall in gross profit rate declared by the assessee on total turnover. Appeals filed by the assessee and Revenue are dismissed.
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2021 (11) TMI 1072 - ITAT AHMEDABAD
Capital gain - taxability of compensation receipts under normal provisions of the Act - sale of land which is a capital asset u/s 2(14) - As submitted that the amount in question was received by the assessee against its right to receive damages which arose from the arbitration ward and not formed the right to sue as erroneously contended by the assessee - as contended that the amount received was in the nature of compensation and would squarely fall within the definition of ‘capital asset’ under s.2(14) of the Act which is defined in widest possible terms and seeks to an encompass property of any kind and includes any right whatsoever arising from such transactions - whether damages received by the assessee for relinquishment of right to sue in the context of the facts of the case are capital receipt excludible from the definition of Section 2(14) of the Act or not and consequently, such receipts arising from release of right to sue is taxable under the scheme of the Act or not? -
HELD THAT:- In the instant case, the rights of the assessee arising under the sale agreement with the original land owners were frustrated in view of another sale agreement of the same land parcels in favour of other party. The assessee received certain consideration by way of damages as a culmination of ongoing vexatious dispute towards rightful ownership of land parcels in question. The amount arose to the assessee by virtue of arbitral award adhered to by the parties to the dispute. The assessee has received consideration for its release of right to sue. Despite the definition of expression ‘capital asset’ in the widest possible term of Section 2(14) of the Act, a right to a capital asset must fall within the expression ‘property of any kind’ and must not fall within the exceptions. Section 6 of Transfer of property Act which uses the same expression ‘property of any kind’ in the context of transferability makes an exception in the case of a mere right to sue.
The issue is no longer res integra. There are long line of judicial precedents which echoes the view that the right to receive the compensation for release of right to sue on account of breach of contract for sale of land is not a capital asset and thus not chargeable to tax as capital gains. Support is drawn from CIT vs. J. Dalmiya[1984 (5) TMI 32 - DELHI HIGH COURT]; Baroda Cements & Chemicals Ltd. vs. CIT [1985 (12) TMI 55 - GUJARAT HIGH COURT]; CIT vs. A. A. Dehgamwalla & Ors. [1991 (4) TMI 38 - BOMBAY HIGH COURT] - As decided in BHOJISON INFRASTRUCTURE PVT. LTD. VERSUS THE INCOME TAX OFFICER, AHMEDABAD [2018 (9) TMI 1239 - ITAT AHMEDABAD] mere ‘right to sue’, while a capital receipt, is not a capital asset under s.2(14) of the Act and thus compensation received on release of right to sue is not a taxable receipt.
Thus such capital receipts towards compensation do not fall within the sweep of expression ‘property of any kind’ notwithstanding its very wide connotations and consequently such capital receipts (not being capital asset) are not susceptible to capital gain tax having regard to provisions of charging section 45 of the Act. Merely because such right towards compensation surfaced as a result of sale of disputed land would not per se govern its taxability unless such right can be termed as a ‘capital asset’ which it is not.
Thus, in totality, we see no error in the conclusion drawn by the CIT(A) in favour of the assessee under the normal provisions of the Act for excluding impugned capital receipts from ambit of taxation. Hence, We decline to interfere with the first appellate order on this score.
Taxability of compensation on the contours of MAT provisions embodied under section 115JB - HELD THAT:- The compensation received for release of right to sue being a capital receipt is not deemed to be ‘income’ and hence not chargeable to tax. Significantly, the Constitution itself uses the term ‘tax on income’ and the term ‘income’ must be construed in the same manner as the one defined under Income Tax Act. As a corollary, it is impermissible to cover such capital receipts under S. 115JB in an unregulated manner. At this stage, we notice a pertinent plea taken on behalf of the assessee that the receipt being of capital nature does not enter into the computation provision at all and hence, there is no question of including the same in book profits for the purposes of Section 115JB of the Act.
Since capital receipts are not ordinarily construed as income under rudimentary understanding of accounting and tax laws, they do not find a specific mention in Section 10 of the Act and consequently Explanation 1 to Section 115JB of the Act is silent on exclusion of capital receipts. In tandem, on facts, the capital receipt has been credited in appropriation of profits account and is not regarded as income per se in the profit & loss account prepared under schedule VI of Companies Act, 1956. Hence, when the factual position and law is read conjointly, it appears that such capital receipts are not susceptible to tax under s.115JB of the Act. The AO cannot bring such capital receipts to tax by including it in book profit artificially
We concur with the view adopted by the CIT(A) in favour of the assessee towards inapplicability of MAT provisions to the impugned capital receipts. In parity with judicial precedents governing the field, we see no error in the conclusion drawn by the CIT(A) in this regard.
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2021 (11) TMI 1071 - ITAT DELHI
Deduction u/s 80P - Disallowance of deduction on the interest received from Bombay Mercantile Bank Ltd. and Ramgharia Co-operative Bank Ltd. - whether it is a case of parking of surplus funds? - CIT-A deleted the addition - HELD THAT:- It is pertinent to note that in the earlier years on the identical issue revenue’s appeal were dismissed and there is no distinguishing factors pointed out by the Ld. DR in the present appeal as well. Therefore, the matter is squarely covered by the decision of the Tribunal in assessee’s own case for earlier years, [2018 (5) TMI 246 - ITAT DELHI] - Authorities below were not justified in refusing to grant deduction under section 80P of the I.T. Act in favour of the assessee.
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2021 (11) TMI 1070 - ITAT BANGALORE
Exemption u/s 11 - Addition on account of income from Pharmacy Unit - Proof of charitable activity u/s 2(15) - assessee is carrying on activities of the nature of Charitable as defined under section 2(15) and, therefore, is eligible for exemption as per the provisions contained in sections 11, 12 and 13 - whether pharmacy business is not an independent business activity so far as the assessee is concerned? - HELD THAT:- As the assessee has undisputedly maintained the books of account for the hospital separately, the assessee fulfils the condition of maintaining the separate books of account for the integral business activity for all integral business activities of running of a hospital i.e pharmacy shop as well. Therefore, there is no violation of the twin conditions specified in section 11(4A) of the Act.
From the comparison of the language of the two provisions of section 11(4A) and section 10(23C) we find, the language used in the provisions are comparable and, therefore, the common purpose is easily decipherable by the above provisions appearing in to different sections from the Act. Therefore, we agree with the relevant argument propounded by the Ld Counsel for the assessee.
Running of a pharmacy is a necessary requirement for running of a hospital. It is impossibility from medical point of view that the hospital can run without “pharmacy shop” in the premises of the hospital. Considering the same in BAUN FOUNDATION TRUST [2012 (4) TMI 172 - BOMBAY HIGH COURT] has held that maintenance of a pharmacy shop is ancillary to the dominant object of running of a hospital and thus, it is an integral part of the hospital. Actually the pharmacy shop is being maintained by the hospital itself and not by any private contractor. Drawing the medicine from such pharmacy shop by the Doctors in respect of the patients is also evident from the records, commonly maintained in their medical reports. It is not the case of the revenue that the profits earned on pharmacy was not spent for the objects of trust.
Pharmacy is an integral part of the hospital business or not. Considering the above, we are of the opinion, the conditions of maintenance of books of account in respect of the business activity of trading of medicines, which is an integral part of the hospital activities, is not the requirement of the law on the facts of this case. Thus, we affirm the assessee’s contention that the pharmacy shop is an integral part of the hospital business and the same is not hit adversely by the conditions specified in the provisions of section 11(4A) of the Act. Therefore, so long as the transactions of such pharmacy which ancillary/ incidental for the business of a hospital and objects of the trust, the conditions relating to maintenance of separate books of accounts are met within the meaning of section 11(4A) of the Act. Accordingly, grounds raised by the Revenue are dismissed.
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2021 (11) TMI 1069 - MADRAS HIGH COURT
Validity of assessment order u/s 144B - petitioner was unable to participate in the personal hearing - petitioner attempted by press Hyperlink but was unable to open the ITBA portal for the personal hearing. Thus, no personal hearing was not conducted - HELD THAT:- Considering the fact that the petitioner was unable to participate in the personal hearing through video conference and considering the fact that the impugned order has been passed by the first respondent even before the 2nd date fixed for Video Conference, the impugned order cannot be sustained.
Accordingly, the impugned orders are hereby quashed. Considering the fact that the dispute pertains to the Assessment year 2013-14 2014~15, the first respondent shall pass a speaking order on merits and in accordance with law, preferably, within a period of ninety days from the date of receipt of a copy of this order. The respondents are directed to give appropriate instructions to the Web Portal Administrator to facilitate the petitioner to file reply, if any, within a period of 30 days and to give a link for the personal hearing through video conference on the date to be fixed by the first respondent.
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2021 (11) TMI 1068 - ITAT AHMEDABAD
Late payment of Provident Fund u/s 36(1) (va) r.w.s.2(24) - delay in depositing the employees’ contribution to Provident Fund by the employer assessee when seen with reference to due date of accrual of salary - HELD THAT:- We observe that the decision of the Hon’ble Gujarat High Court Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT] does not apply where the payment has been made on or before the due date. The deduction under s.36(1)(va) in such case is available without any fetters.
It may be pertinent to observe that disallowance under s.43B r.w.s. 36(1)(va) of the Act in respect of non-payment of provident fund etc. within the due date is not intended to cover genuine and routine cases on late payment but only those where the employer has mis-utilized the funds collected from the assessee.
The addition/disallowance under s.43B of the Act for such delay of bare one or two days in depositing the employees’ provident fund would thus be wholly disproportionate to the default committed, if any. Thus, seen from any angle, the addition/disallowance under s. 36(1)(va) r.w.s. 2(24)(x) of the Act is not justified in the instant case. Assessee appeal allowed.
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2021 (11) TMI 1067 - ITAT PUNE
Rectification u/s 254 - AR submitted that the Tribunal passed the order disposing off all the grounds except ground No.8, which was inadvertently omitted to be argued by him as, therefore, prayed that an opportunity be given to the assessee to argue ground No.8 - HELD THAT:- We recall the impugned order for the limited purpose of disposing ground No.8 taken up in the Memorandum of appeal, but omitted to be argued by the ld. AR during the course of proceedings u/s 254(1) of the Act. The Registry is directed to fix the appeal for hearing for this limited purpose on 22.11.2021. Since the date of hearing was announced in the open court, there is no need to issue any separate notice of hearing. Miscellaneous Application filed by the assessee is allowed to this extent.
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2021 (11) TMI 1065 - MADRAS HIGH COURT
Validity of Reopening of assessment u/s 147 - as argued by assessee that detailed objection was filed by the petitioner and without giving a speaking order the impugned order has been passed - HELD THAT:- Though the petitioner did not ask for a speaking order initially, nevertheless the facts on record indicate that before the assessment order was passed, by a communication dated 19.09.2018, the petitioner has asked for a speaking order. In any event, once a notice under Section 148 is issued and reasons given thereafter, it was incumbent on the part of the respondent to have passed a speaking order, in terms of the decision of the Hon-ble Supreme Court [2002 (11) TMI 7 - SUPREME COURT] before passing an assessment order. Considering the same impugned order is set aside and the case is remitted back to the respondent to pass a speaking order and thereafter, complete the assessment in accordance with law.
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2021 (11) TMI 1062 - ITAT JAIPUR
Additions in respect of employees contribution towards ESI/PF - deposit of the employees’s contribution towards ESI and PF though paid before the due date of filing of return of income u/s 139(1) - Scope of amendment - HELD THAT:- In the instant case, admittedly and undisputedly, the employees’ contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says “these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years”. In the instant case, the impugned assessment year is assessment year 2019-20 and therefore, the said amended provisions cannot be applied in the instant case. See MOHANGARH ENGINEERS AND CONSTRUCTION COMPANY [2021 (8) TMI 563 - ITAT JODHPUR] and SHRI GOPALAKRISHNA ASWINI KUMAR [2021 (10) TMI 952 - ITAT BANGALORE] - Decided in favour of assessee.
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2021 (11) TMI 1061 - ITAT JAIPUR
Delayed employees contribution towards ESI/PF - scope of amendment - HELD THAT:- In the instant case, admittedly and undisputedly, the employees’ contribution to ESI and PF collected by the assessee from its employees have been deposited well before the due date of filing of return of income u/s 139(1) of the Act. Further, the ld D/R has referred to the explanation to section 36(1)(va) and section 43B by the Finance Act, 2021 and has also referred to the rationale of the amendment as explained by the Memorandum in the Finance Bill, 2021, however, we find that there are express wordings in the said memorandum which says “these amendments will take effect from 1st April, 2021 and will accordingly apply to assessment year 2021-22 and subsequent assessment years”. In the instant case, the impugned assessment year is assessment year 2018-19 and therefore, the said amended provisions cannot be applied in the instant case - See SHRI GOPALAKRISHNA ASWINI KUMAR VERSUS THE ASSISTANT DIRECTOR OF INCOME TAX, BENGALURU [2021 (10) TMI 952 - ITAT BANGALORE] - Decided in favour of assessee.
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2021 (11) TMI 1059 - ITAT BANGALORE
TP Adjustment - comparable selection - Filters applied by assessee in its TP study - Capacity utilization - HELD THAT:- In this case, the exact details of capacity utilisation of comparable companies was not made available to the TPO. It was alleged that the TPO should obtained it by exercising his powers u/s. 133(6) of the Act so as to compare the capacity utilisation of the comparables with the assessee company. In our opinion, it is appropriate to remit the issue relating to adjustment on account of capacity utilisation of the assessee to the file of the AO/TPO for deciding the same afresh keeping in view the OECD guidelines. If the exact details of capacity utilisation of comparable companies are not available in the public domain, the AO/TPO is directed to obtain the same directly from the comparable companies and decide the issue afresh, after affording opportunity of being heard to the assessee
Customs Duty Adjustment - So as to bring uniformity, the customs duty was to be eliminated from the comparable price also to arrive at correct PLI. Accordingly, we remit the issue to the file of AO for fresh consideration.
Adjustment for foreign exchange fluctuations - Higher Import Content of the assessee vis-à-vis comparable companies - This issue was also considered by the Chennai Tribunal in the case of Gates Unitta India Company (P.) Ltd [2017 (4) TMI 1585 - ITAT CHENNAI] direct the TPO to provide considerable exchange fluctuation adjustment while determining the ALP. Accordingly, this issue is remitted to the file of the TPO for determining the ALP after considering the above three components i.e. customs duty adjustment, air freight adjustment and foreign exchange fluctuation adjustment.
Treatment of amortisation of goodwill as operating expenditure - HELD THAT:- As relying on ST-ERICSSON INDIA PVT. LTD. VERSUS DCIT, CIRCLE 24 (2) , NEW DELHI AND VICE-VERSA [2018 (7) TMI 1903 - ITAT DELHI] as held mortization of goodwill is an extra ordinary item and is not pertaining to the regular operation of the assessee, and hence non-operating in nature - issue decided in favour of assessee.
Adjustment, if any, should be restricted to proportionate value of international transaction of the assessee - HELD THAT:- This issue was considered by the Hon’ble Supreme Court in the case of CIT v. Hindustan Unilever Ltd. [2018 (10) TMI 1611 - SC ORDER] wherein it was held that while determining the ALP of international transactions, benchmarking has to be done only on Associated Enterprises transactions and not for the entire turnover. In view of this, we find force in the argument of the ld. AR that the TP adjustment should be restricted only to international transactions pertaining to purchase of raw materials from AEs and other related transactions only. With these observations, we allow this ground of the assessee.
Comparable for software section - erroneous computation of margin - L&T and Persistent were considered as not comparable in the case of CGI Information Systems & Management Consultants (P.) Ltd.[2018 (4) TMI 1755 - ITAT BANGALORE] on the ground that these company was a software product company and segmental information on SWD services was not available - thus we direct exclusion of these two companies from the final list of comparables.
Consider Akshay Software Technologies Ltd. as a comparable.
Technosoft Engineering - As the allegation of the ld. DR is that the complete financials are not made available to the AO/TPO. In our opinion, if the data is not in the public domain, the AO can exercise his powers u/s. 133(6) of the Act to obtain the financials of this company and decide the issue accordingly. Hence this issue is remitted to the AO/TPO.
Evoke Technologies Ltd. is a comparable company. Accordingly, we remit the issue to the AO/TPO with a direction to go through the financials of this company and decide the issue accordingly.
Disallowance of provision for warranty - AO disallowed the provision for warranty contending the same to be contingent liability/ created on estimate basis - HELD THAT:- As difference between the provision amount and the utilization amount is not the benchmark that is required to be considered. What needs to be seen is whether the provision created is on scientific basis. It is submitted that the amount of provision is a factual outcome of the methodology followed in creating provision and utilization would be the actual expenditure incurred against the warranty claims. In the present case, the assessee has followed the scientific methodology based on which provision amount is arrived at.
The assessee follows the specific methodology of creating provision for warranty consistently over the years. The said methodology has been submitted before the AO during the course of assessment proceedings. It creates provision for warranty on a scientific basis.
We direct the AO to examine the assessee’s past record and allow the provision for warranty in the same proportion as compared to the sales as in the earlier assessment years.For this purpose, the AO may consider the data of the immediate past five assessment years and decide the issue accordingly.
Disallowance of annual licence fee - AO disallowed the same contending it to be capital in nature and also that it is not a genuine expenditure while passing the draft order, on the contention that no evidences were submitted supporting the same - HELD THAT:- The claim of the assessee regarding the expenses being for annual licence fees has not been examined at all and that the details / evidences submitted by the assessee before the DRP has not been admitted for consideration, we deem it appropriate to follow the order of the Co-ordinate Bench of this Tribunal in the assessee's own case for Assessment Year 2009-10 [2019 (4) TMI 1929 - ITAT BANGALORE] admit the details filed by assessee before DRP and remand this issue back to the file of the AO with the same directions as contained in the Tribunal order for Assessment Year 2009-10.
Appeal of the assessee is partly allowed for statistical purposes.
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2021 (11) TMI 1058 - GUJARAT HIGH COURT
Non maintainability of appeal on low tax effect - Addition u/s 68 - bogus LTCG on penny stock - Whether the Appellate Tribunal is justified in law and on facts in disposing the appeal of the revenue on account of low tax effect without deciding the appeal on merits even when the issue under appeal was claimed of bogus LTCG on penny stock for which no monetary limits were applicable? - HELD THAT:- This Court in Special Civil Application [2021 (6) TMI 1065 - GUJARAT HIGH COURT] by virtue of the said Circular dated 06.09.2019, the appeals could be filed on merits, irrespective of the monetary limits fixed in earlier cases, if the Board passes special order for filing appeals in cases involving tax evasion activity. The said Circular speaks about the Appeals that may be filed with the special order of the Board in future, and hence could not be construed to have retrospective effect. The Tribunal interpreting the said Circular/ Office Memorandum in the impugned order has rightly observed that in respect of each case or category of cases whether an appeal should be filed in view of the Circular dated 06.09.2019 or not shall be decided by the Board by way of special order, and thus a specific requirement of issuance of special order by CBDT is a must. The Tribunal therefore has rightly held that the CBDT Circular No. 23/2019 dated 06.09.2019 should be read along with the Office Memorandum dated 16.09.2019, in respect of the appeals to be filed pursuant to such special orders of CBDT and shall apply to all the appeals filed on or after 16.09.2019 by the revenue, where the tax effect may be low but the appeal could still be filed by the revenue on merits.
The appeals including the appeal in case of the respondent, which were disposed of by the Tribunal vide the common order dated 14.08.2019 could not be said to have been filed pursuant to the special order of the CBDT in view of the Circular dated 06.09.2019 read with the Office Memorandum dated 16.09.2019, and therefore it could not be said that the Tribunal had committed any mistake apparent from the record, which would require rectification as envisaged in Section 254(2) of the said Act.
In that view of the matter, the Court does not find any illegality or infirmity in the impugned order dated 09.09.2020 passed by the Tribunal dismissing the Miscellaneous Application filed by the petitioner. The petition being devoid of merits is dismissed in limine.
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