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Income Tax - Case Laws

Showing 61 to 80 of 773 Records

• 2016 (6) TMI 1391 - ITAT AHMEDABAD
  

  Addition u/s 14A r.w.s. 8D - HELD THAT:- Disallowance u/s 14A of the Act without examining the facts referred above which were very crucial to reach at the final disallowance u/s 14A of the Act. There are series of judgments of the co-ordinate benches that the disallowance u/s 14A should not exceed the exempt income earned during the year and also decisions wherein the disallowance u/s 14A of the Act on account of interest expenditure are held to be incorrect if the assessee has sufficient equity and general reserve to cover the investments.

  Applying the decision of the co-ordinate bench in assessee’s own case in [2014 (6) TMI 1041 - ITAT AHMEDABAD] the matter is set aside to the file of Assessing Officer to examine the facts and figures of the case in the light of our observations made above in order to arrive at a final conclusion as to whether disallowance u/s 14A is to be made and if so, then the amount thereof which in no case should exceed the exempted income earned by assessee during the year under appeal. It is needless to mention that AO shall allow reasonable and sufficient opportunity of hearing to the assessee before adjudicating the same. These grounds of assessee and the Revenue are allowed for statistical purposes.

  Enhancement of Book Profit computed u/s 115JB - disallowance made under section 14A - HELD THAT:- We set aside the matter referred in this ground to the file of Assessing Officer to recomputed book profit u/s 115JB of the Act on the basis of disallowance, if any, to be made by ld. Assessing Officer as referred in ground no.1 above for calculating the disallowance, if any, u/s 14A of the Act. Accordingly, this ground is also allowed for statistical purposes.

  Disallowance of depreciation on the basis that certain items included under the head computers @ 60% - HELD THAT:- We find that during the assessment proceedings assessee has himself submitted the revised computation of depreciation on the computers and has agreed that depreciation has been claimed excess by ₹ 9174986/-. Thereafter the matter which was almost closed due to the submission made by assessee, was revived back by the assessee by raising ground against this addition before CIT(A) and gave various details and documents supporting the ground that depreciation disallowed needs to be re-worked as various types of expenditure which are fully allowable during the year are included in addition of block of assets, computers and similarly there are various machines which are actually eligible for depreciation @ 60% have been subjected to depreciation @ 15% only. We further observe that ld. CIT(A) has looked into this aspect and has open the way for examining the relates facts towards calculation of correct depreciation in the block of assets relating to computers by way of observing the related facts in his decision.

  Assessing Officer for re-examination and calculation of depreciation on computers in the light of submissions made by assessee before ld. CIT(A) after giving sufficient and reasonable opportunity to the assessee for providing necessary details so as to arrive at the correct amount of depreciation on computers for which the assessee is eligible. Accordingly this ground is allowed for statistical purposes.

  Claim of guarantee fees paid to Government of Gujarat - expenditure of capital in nature or revenue in nature - HELD THAT:- Issue raised in this ground is squarely covered by the decision of co-ordinate bench referred above in the case of Gujarat Energy Transmission Corpn. [2015 (6) TMI 1096 - ITAT AHMEDABAD] and respectfully following the same, we find no reason to interfere with the order of ld. CIT(A) and uphold the same. This ground of Revenue is dismissed.

  Adding the provisions for gratuity to the book profit calculated u/s 115JB - HELD THAT:- Provision for gratuity based upon acturial valuation was not an unascertained liability which could be added back while computing the book profit for the purpose of Section 115JB. See GUJARAT URJA VIKAS NIGAM LTD [2014 (6) TMI 1041 - ITAT AHMEDABAD]

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• 2016 (6) TMI 1390 - GUJARAT HIGH COURT
  

  Addition u/s 68 - unexplained share capital - HELD THAT:- Supreme Court has in the case of Commissioner of Income – tax v. Lovely Exports (P) Ltd., [2008 (1) TMI 575 - SC ORDER] held that if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the Assessing Officer, then the Department is free to proceed to reopen the individual assessments in accordance with law. Such amounts cannot be regarded as undisclosed income u/s 68 of the assessee company.

  Applying the said principles to the facts of the present case, the Assessing Officer having traced out the source of funds to specific persons who had invested the same in share of the assessee company, it was open for the Assessing Officer to proceed against the said persons. The funds not having emanated from the assessee company, there was no warrant for making addition of the said amount as undisclosed income under section 68 of the act in its hands. In the circumstances, the tribunal was justified in deleting the addition made under section 68 - Decided in favour of the assessee

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• 2016 (6) TMI 1389 - ITAT DELHI
  

  Exemption u/s. 11 denied - assessee is involved in commercial activities as the assessee receives coaching fees from the students of CA while giving coaching to the CA students - HELD THAT:- As decided in own case [2014 (4) TMI 962 - ITAT DELHI ] The Institute as such merely it is receiving coaching fee from students for imparting education, cannot be said to have been carrying on business and accordingly it is not required to maintain separate books of accounts as alleged by DIT(E). The income of the coaching classes earned by the assessee institute is within its objects and its Regulations and further these activities are educational activity within the definition of section 2(15) of the Income Tax Act, 1961, and consequently therefore cannot be activity of business for which separate books of accounts are required to be maintained. The order of the ld.DIT(E) is therefore, not sustainable as the income of the Institute is exempt not only u/s 10(23C)(iv) but also under section 11. The institute is an educational institute and hence its income will also be exempt under section 11 as education falls within the meaning of charitable purpose under section 2(15) of the Act. - Decided in favour of assessee.

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• 2016 (6) TMI 1388 - ITAT CHENNAI
  

  Correct head of income - lumpsum consideration towards sale of Drum Plant (giving up right to manufacture) - business income or capital gains - HELD THAT:- In an identical issue raised on similar facts and circumstances, by following the decision of the Hon’ble Supreme Court in the case of Guffic Chem Pvt. Ltd [2011 (3) TMI 6 - SUPREME COURT] the Ahmedabad Bench of the Tribunal has decided the issue in favour of the assessee in the case of DCIT v. M/s. Gufic Limited [2012 (1) TMI 379 - ITAT AHMEDABAD] as held prior to April 1, 2003, when Parliament stepped in to specifically tax such receipts, the payment was in the nature of a capital receipt - Decided in favour of assessee.

  Capital gain computation - Adoption of guideline value for the purpose of computation of capital gain under section 50C - HELD THAT:- When the provisions of section 50C of the Act was not at all available at the time of sale agreement dated 27.06.2002, the provisions of Chapter XXC of the Act was available with the avowed object of ensuring the payment of tax properly payable on the market value of the immovable property transferred inter-vivo and for the purpose of computation of capital gains, the consideration shown by the assessee in the sale agreement for which NOC was granted by the Appropriate Authority under Chapter XXC of the Act, both the penal provisions of Chapter XXC of the Act and the provisions of section 50C of the Act, which came into effect at a later date should not affect jointly. Under the above facts and circumstances, we are of the considered opinion that when the penal provisions of Chapter XXC of the Act was very much available at the time of transaction taken place and when the provisions of section 50C of the Act came into effect in the subsequent financial year, the Assessing Officer was not correct in applying the provisions of section 50C of the Act. Similar ratio was laid down by the Kolkata Benches of the Tribunal in the case of Neville De Noranha v. ACIT [2008 (2) TMI 447 - ITAT CALCUTTA-C] . However, any final judgement against the stay on operation of the order of the Inspector General of Registration, which is pending before the Hon’ble Jurisdictional High Court, would be final. The ground raised by the assessee is allowed subject to the decision of the Hon’ble Madras High Court.

  Disallowance of provisions for gratuity - section 40A applicability - HELD THAT:- Gratuity to be deductible, the conditions laid down in section 40A(7) had to be fulfilled. The deduction could not be allowed on general principles under any other section of the Act, because sub-section (1) of section 40A made it clear that the provisions of the section had effect notwithstanding anything to the contrary contained in any other provisions of the Act relating to the computation of income under the head “Profits and gains of business or profession”. In other words, section 40A had effect notwithstanding anything contained in ss. 30 to 39 of the Act. In view of the above observation, the Assessing Officer is directed to follow the decision in the case of Shree Sajjan Mills Ltd. v. CIT [1985 (10) TMI 2 - SUPREME COURT] and also the decision in the case of South Madras Electric Supply Corporation Ltd. v. CIT [1998 (4) TMI 46 - MADRAS HIGH COURT] and decide the issue afresh. Accordingly, we set aside the order of the ld. CIT(A) on this issue and the ground raised by the assessee is allowed for statistical purposes.

  Addition towards claim of ERP expenses - Allowable revenue expenses - diversified views - HELD THAT:- Though the two Coordinate Benches of the Tribunal have observed that the ERP expenses incurred by the assessee is of revenue in nature, the Assessing Officer has not passed speaking order as to whether the software was an outright purchase of computer programme which relates to technical “know-how”. According to the Assessing the expenditure on computer software gives an enduring benefit to an assessee, but he has not stated the duration of time for which the assessee right to use the software or the software can be used permanently then it can be said that the assessee can enjoy enduring benefit, but if the life span of the software is shorter or less than two years, the expenditure incurred for the purchase of software should be treated as revenue expenditure. With the above observations, we set aside the order of the ld. CIT(A) and direct the Assessing Officer to examine the issue in line of the decisions of the Coordinate Benches of the Tribunal as referred herein above. Accordingly, the ground raised by the assessee for the assessment years 2006-07 and 2007-08 is allowed for statistical purposes.

  Contribution to benevolent fund under section 40A(9) - HELD THAT:- by following his own order for earlier assessment years, the ld. CIT(A) has deleted the addition made by the Assessing Officer for the assessment year 2003-04 and for the assessment years 2004-05, 2005-06, 2006-07 and 2007-08 also the ld. CIT(A) deleted the addition made by the Assessing Officer. The only contention of the Department is that the earlier order of the ld. CIT(A) in assessee’s own case has not become final cannot be accepted since the Department has not filed any order of higher forum having modified or reversed the above decision of the Coordinate Bench of the Tribunal. Under the above facts and circumstances, we sustain the order of the ld. CIT(A) on this issue for all the above assessment years under appeal and dismiss the ground raised by the Revenue.

  Deduction u/s 80IA on captive power consumption - over 96% of the power generated has been captively consumed in the assessee’s factory itself - HELD THAT:- As relying on TANFAC INDUSTRIES LTD. [2009 (7) TMI 1260 - SUPREME COURT] we confirm the order passed by the ld. CIT(A) holding that the assessee is entitled to claim deduction under section 80IA of the Act and accordingly, the ground raised by the Revenue for the assessment years 2003-04, 2004-05, 2005-06, 2006-07 and 2007-08 is dismissed.

  Upfront fee and guarantee commission paid by the assessee - allowable business expenditure - HELD THAT:- In the case of CIT v. Meenakshi Mills Ltd. [2006 (9) TMI 139 - MADRAS HIGH COURT] has held that the amount paid by the assessee to the Bank as upfront fees was deductible as business expenditure. In the case of DCIT v. Gujarat Alkalies and Chemicals Ltd. . [2008 (2) TMI 11 - SUPREME COURT] has held that the commitment charges, which are in the nature of upfront fees are allowable as revenue expenditure. Further in the case of CIT v. Madras Cements Ltd. [2001 (11) TMI 62 - MADRAS HIGH COURT] has allowed the appeal of the assessee, wherein the assessee has paid guarantee commission to the bank for purchase of machinery. Moreover, in the case of CIT v. Sivakami Mills Ltd. [1997 (2) TMI 13 - SUPREME COURT] has also held that guarantee commission paid was allowable as business expenditure. CIT(A) has rightly allowed the ground raised by the assessee with regard to the claim of deduction of upfront fees and guarantee commission. - Decided against revenue

  MAT Computation - whether provision for gratuity made on actuarial basis should not be added back while computing the book profits - HELD THAT:- In the case of DCIT Vs Eicher Motors Ltd [2002 (5) TMI 221 - ITAT INDORE] has held that the provision for gratuity, made on actuarial valuation was an ascertained liability and the same could not be added back to the book profit. Also in case of Greaves Chitram Ud Vs DCIT [2006 (3) TMI 563 - ITAT MUMBAI] also held that the gratuity liability, which was based on actuarial valuation, was deductible from the book profits as ascertained liability. CIT(A) not erred in holding that the provision for gratuity made on actuarial basis should not be added back while computing the book profits.

  Non compete fees paid - allowable deferred revenue expenditure - HELD THAT:- As relying on CARBORANDUM UNIVERSAL LTD. VERSUS JCIT [2012 (10) TMI 178 - MADRAS HIGH COURT] we find no infirmity in the order passed by the ld. CIT(A) CIT(A) directing the Assessing Officer to treat the non-compete fees paid as deferred revenue expenditure and allow 1/10th of the expenditure as deduction for every year.

  Repairs in the form of renovation to building - HELD THAT:- In view of the ratio laid down by the Hon’ble Jurisdictional High Court in the case of CIT v. Ooty Dasaprakash [1998 (2) TMI 77 - MADRAS HIGH COURT] , we remit the issue back to the file of the Assessing Officer to segregate the total expenditure as capital and revenue and consider the same appropriately. This ground of appeal of the Revenue is remitted to the Assessing Officer for fresh consideration.

  Disallowance of royalty paid - HELD THAT:- By following the decision in the case of Gotan Lime Syndicate v. CIT [1965 (11) TMI 35 - SUPREME COURT] the ld. CIT(A) allowed the ground raised by the assessee as held in the absence of material to show that any part of the royalty had to be treated as premium and referable to the acquisition of the mining lease, the royalty payment, including the dead rent, had relation only the lime deposits to be gat and had therefore to be treated as revenue expenditure. Although the appellant did derive an advantage-assuming that that advantage was to last at least for a period of five years-there was no payment once for all. No lump sum payment was ever settled or paid; there was only an annual payment of royalty or dead rent. The royalty was not a direct payment for securing an enduring advantage; it had relation to the raw material to be obtained - ground raised by the Revenue is dismissed.

  Disallowance of expenditure related to Tsunami relief - Allowable revenue expenses - HELD THAT:- CIT(A), clearly mentioning that “The appellant fails on this ground”, we are unable to understand as to how the Department is aggrieved by the above order of the ld. CIT(A), who has not allowed the ground raised by the assessee. Thus, the ground raised by the Revenue is not maintainable and accordingly, the same stands dismissed.

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• 2016 (6) TMI 1387 - ITAT MUMBAI
  

  Exemption u/s 11 denied - appellant’s primary activities were not for the benefit of the public at large and were also not of charitable nature - HELD THAT:- The order for the A.Y. of 2008-09 [2015 (2) TMI 449 - ITAT MUMBAI] has been passed under the similar circumstances hence the same is applicable in this assessment year also. No distinguishable material was produced before us to which it can be assumed that the activity of the institute has now being changed. The object and activity of the institute are quite similar with the assessment year of 2008-09 vide which the above mentioned order has been passed. We found no ground to deviate with the finding of the order of the Tribunal mentioned above. Therefore, in the said circumstances we are of the opinion that the assessee is charitable organization and eligible for deduction u/s.11&12 of the Act. - Decided in favour of assessee

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• 2016 (6) TMI 1386 - ITAT MUMBAI
  

  TP Adjustment - TPO attributed 100 percent of the loan syndication fee income to the Appellant and Nil to the AE - assessee submits that in similar type of cases, the Hon’ble Tribunal held that only 20 to 25% loan syndication fee is attributable to the assessee but not 100% as was done by the Assessing Officer - HELD THAT:- As relying on Calyon Bank Vs DDIT [2014 (3) TMI 1158 - ITAT MUMBAI] and M/s. Credit Lyonnais Vs ADIT [2014 (7) TMI 1 - ITAT MUMBAI] we restore this issue to the file of the Assessing Officer to follow the decisions and decide the issue in line with the above decisions for allocation of loan syndication fee between the assessee and its AE after giving opportunity of being heard to the assessee.

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• 2016 (6) TMI 1384 - ITAT CHANDIGARH
  

  Penalty u/s 271CA - non deduction of TCS - HELD THAT:- As decided in case of ITO (TDS) Vs Om Parkash Gupta (HUF) [2016 (6) TMI 938 - ITAT CHANDIGARH]. Since, there is no demand arises against the assessee and all taxes have been paid and no loss to revenue have been caused, therefore, it is not a fit case for levy of penalty against the assessee.

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• 2016 (6) TMI 1383 - ITAT JAIPUR
  

  Penalty u/s 271(1)(c) - bogus/non genuine agricultural income - HELD THAT:- In absence of any specific charge, the assessee does not get proper opportunity to defend its case and violate the principles of natural justice. The Hon’ble Karnataka High Court in the case of CIT Vs M/s Manjunath Cotton & Ginning Factory & Ors. [2013 (7) TMI 620 - KARNATAKA HIGH COURT] has held that sending printed form where all the grounds mentioned in section 271 are mentioned would not satisfy the requirement of law. The assessee should know the ground which he has to meet specifically, otherwise, the principle of natural justice is offended on the basis of such proceedings, no penalty could be imposed to the assessee. Ticking of the penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. Penalty imposed by the ld Assessing Officer confirmed by the ld CIT(A) is not justified. Accordingly, we allow the assessee’s appeal.

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• 2016 (6) TMI 1382 - ITAT JAIPUR
  

  Penalty u/s 271(1)(c) - trading additions made on account of cessation of liability by invoking provisions of section 41(1) - HELD THAT:- It is settled proposition of law that the penalty proceedings and quantum proceedings are two different and distinct proceedings. By way of penalty proceedings, the revenue is forcing the tax payer to pay additional amount of tax in addition to the tax assessed and interest charged in the form of penalty for concealment of particulars of his income or furnishing of inaccurate particulars of such income. It is settled position of law that the assessee is to be put to notice for the specific charge. The Hon’ble Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory,[2013 (7) TMI 620 - KARNATAKA HIGH COURT] has held that the notice under section 274 of the Act should specifically state the grounds mentioned in section 271(1)(c) as to whether it is for concealment or furnishing inaccurate particulars of income.

  Notice under section 274 was on the printed format. The AO has not given any specific charge. Therefore, the penalty proceedings as initiated are vitiated for want of procedural compliance. Thus the penalty order is quashed being bad in law. This ground of the assessee is allowed.

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• 2016 (6) TMI 1381 - ITAT MUMBAI
  

  Disallowance u/s. 14A while computing book profit u/s.115JB - HELD THAT:- Since the assessee is a banking company the provisions of section 115JB was not applicable to a banking company, hence no income is assessable u/s.115JB. The said section has been extended to other assessee’s like banks, insurance companies, etc. also as per the amendment made by Finance Act, 2012. In the following cases, it has been held that “Section 115JB is not applicable to Banks and other companies whose accounts are not made as per section 211 of the Companies Act”. In view of the above, we do not find any merit for the addition made u/s.115JB of the Act.

  Interest levied u/s. 234D - HELD THAT:- It is the case of the reassessment u/s. 147, interest u/s. 234D is applicable only when refund is granted to the assessee u/s 143(1) and no refund is due on regular assessment or refund granted exceeds the amount refundable on regular assessment. Since the original assessment was completed u/s.143(3), the provisions of section 234D is not applicable to the instant assessee.

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• 2016 (6) TMI 1377 - GUJARAT HIGH COURT
  

  Revision u/s 263 - addition on account of bogus share application and premium investment - Commissioner who was of the opinion that inquiries were not made in respect of 11 share and premium applicants therefore restored the matter back to the AO for carrying out necessary inquiries with respect to identity and creditworthiness of these 11 share applicants and then to decide about genuineness of the share application transactions - HELD THAT:- Tribunal in impugned judgment upon perusal of the record, particularly of the assessment proceedings held that the Assessing Officer had in fact, made inquiries with these 11 applicants also. The Tribunal held that even the Commissioner did not dispute this fact. The Tribunal was therefore of the opinion that this was not a case where it can be said that the Assessing Officer failed to carry out any inquiry at all. The Tribunal also noted that the Assessing Officer had called for the reply of the assessee who had given elaborate explanation. In fact, it was this exercise undertaken by the AO in the reassessment proceedings which led to addition of ₹ 26 lacs in case of the assessee on account of bogus share application and premium investment.

  The facts being such, we do not found any error in the Tribunal striking down the order of the Commissioner of Incometax (Appeals) passed under section 263 - No question of law arises

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• 2016 (6) TMI 1376 - ITAT MUMBAI
  

  Addition u/s 68 - unexplained cash credit - HELD THAT:- Merely because the investment of ₹ 2.94 crore has come from a KYC compliant NRO account is not enough to prove either the genuineness of the transaction or creditworthiness of Shri Vakil. It is not fair on the part of the first appellate authority to put the entire onus on the Assessing Officer to prove that the transaction is not genuine or Shri Vakil has no creditworthiness.

  When the AO in his remand report has clearly stated that the assessee neither submitted the documentary evidence called for nor produced Shri Vakil for examination to ascertain his creditworthiness as well as genuineness of the transaction, the AO could not have accepted the transaction as genuine in the absence of proper evidence.

  We are inclined to set aside the impugned order of the Commissioner (Appeals) and restore the matter back to the file of the AO to examine the issue relating to genuineness of the investment made of ₹ 2.94 crore by Shri Vakil, in share application money of the assessee company and decide the issue after providing adequate opportunity of hearing to the assessee. The assessee is at liberty to furnish necessary evidences either documentary or by producing Shri Vakil, to prove the genuineness of the investment made by him and also his creditworthiness.- Ground raised by the Department is partly allowed for statistical purposes.

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• 2016 (6) TMI 1375 - ITAT BANGALORE
  

  Rectification of mistake - TP Adjustment - Working capital adjustment - as per assessee lower authorities have erred in not giving working capital adjustment in the final assessment order even though it was given in order passed u/s.92CA. Even otherwise, working capital adjustment is incorrectly computed - HELD THAT:- Tribunal had allowed the ground of the assessee, though second part of the ground was not specifically dealt with. Not dealing with the second part of the ground regarding incorrect computation of working capital is a mistake apparent on record. There can be no dispute that working capital adjustment has to be calculated from the final list of comparables and cannot be restricted. We therefore modify para 43 of the order and direct the AO / TPO to give working capital adjustment based on actual figures computed from the final list of comparables. MP filed by the assessee is allowed.

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• 2016 (6) TMI 1374 - ITAT BANGALORE
  

  Transfer Pricing Adjustment - assessee is engaged in the business of providing software services related to back office operations on contract basis to overseas Siemens Group companies - RPT filter at 15% - HELD THAT:- In normal circumstances when there is no difficulty in selecting the comparables, the RPT filter should not exceed 15% of the sale/revenue. In the case on hand, the TPO has selected as many as 27 comparables which shows that there was no difficulty in finding the comparable companies and therefore we are of the considered opinion that the RPT filter shall not exceed 15% of the total sale instead of 25% filter applied by the TPO. Only in the exceptional cases where the comparable companies are not easily available and only few companies are found during the search then the tolerance range of RPT can be relaxed to the maximum limit of 25%. Since the case on hand is not an exceptional case therefore in our view the extreme limit of 25% of RPT filter cannot be applied in this case. In view of the above facts, we admit the additional grounds raised by the assessee regarding the RPT filter at 15%.

  Application of employee cost filter at 25% - HELD THAT:- We agree with the contention of the learned Authorised Representative that the employee cost filter should be applied at 25% however even if it is applied to 1 or 2% less or more will not cause any substantial effect or would be prejudicial to the interest of either of the party. We are of the view that the ITES sector is employee intensive and therefore the cost of the employees cannot be ignored for selecting the comparable companies. If in a particular case of company, the employee cost is less than the average cost previaling in the industry then it is necessary to find out the reasons of such a low employee cost which is against the normal business practice in this industry. Accordingly we admit the additional ground raised by the assessee with a rider that the TPO has to apply a proper filter of employee cost and then apply the same on all the comparable companies in the set of comparables.

  A low employee cost shows a different business model and it appears that these companies are outsourcing their business however since the TPO has not examined this issue therefore we set aside this issue to the record of the TPO/A.O for limited purpose of verification of the reasons for such a low employee cost and if it is found that low employee cost is due to a different business model then these companies shall be excluded from the list of comparables.

  Software development segment cannot be compared with ITES segment and hence this company cannot be compared with the assessee's ITES segment.

  Assessing Officer himself has applied the employee cost filter at 25% and this company is having employee cost of 22.69%. However, in the case of the assessee as we have discussed in the foregoing paras neither the assessee nor the TPO has applied any employee cost filter. While deciding the additioal ground we have set aside this issue to the record of the TPO/A.O to apply an appropriate employee cost filter. Accordingly, the comparability of this company has been set aside to the record of the TPO/A.O for reconsideration and adjudication.

  Revenue from software products and also enjoy the benefit of huge intangible asset apart from brand value and leader in the market.

  Since the employee cost is only 7.16% and further the revenue form ITES is only 8.21% therefore by any yardstick this company cannot be considered as functionally comparable having a different business model of low employee cost and low revenue from the ITES segment. Accordingly, we direct the A.O./TPO to verify the alleged fact and if it is found correct, this company shall be excluded from the list of comparables.

  Since we have directed the A.O./TPO to exclude certain comparables and also re-examine certain issues therefore the ALP has to be recomputed after exclusion of the companies from the list of comparables as directed by us as well as re-examination of the comparability of certain companies. Needless to say that the benefit of the proviso to Section 92C also be considered if the ALP is within the tolerance range of + or – 5%.

  Foreign currency from the export turnover for computation of deduction under Section 10A - HELD THAT:- The Hon’ble Karnataka High Court in the case of CIT v M/s Tata Elxsi Ltd. & Others [2011 (8) TMI 782 - KARNATAKA HIGH COURT] had held that while computing the exemption u/s 10A, if the export turnover in the numerator is to be arrived at after excluding certain expenses, the same should also be excluded from the total turnover in the denominator - we direct the AO to exclude the above mentioned expenses both from the export turnover as well as from the total turnover while calculating deduction u/s 10A

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• 2016 (6) TMI 1373 - ITAT DELHI
  

  Validity of reopening u/s 147 - initiation of reassessment proceedings has been proceeded after internal audit report of the department - whether reopening of assessment and reopening of assessment proceedings beyond four years was validly initiated in the present case ? - assessee did not classify the golf course as per provisions of the Act as to whether it is part of ‘building’ or ‘plant and machinery’ - HELD THAT:- The income of the assessee escaped assessment due to the reason of failure on the part of the assessee in disclosing fully and truly all material facts pertaining to depreciation on golf course and on the issue of income from sale of Labunum Project. Therefore, on these two counts, action of the AO to initiate reassessment proceedings u/s 147 of the Act and issuing notice u/s 148 of the Act against the assessee for A.Y 2001-02 beyond four years cannot be held as invalid assumption of jurisdiction and finally part conclusion of the ld. CIT(A) on legal contention and objection of the assessee are upheld.

  Suppressed recognition of revenue from sale value of project - HELD THAT:- From the statement submitted by the assessee during the assessment proceedings we observe that the assessee has recorded total sales value of ₹ 174.99 crores whereas sales value has been recognised @ 98% of ₹ 171.10 crores and proportionate project cost of ₹ 156.15 crores has been debited to Profit and loss account and in our humble understanding, this calculation is not in accordance with percentage of completion method. If assessee has incurred some more cost in the subsequent A.Ys, but the total sales value was received during the year under consideration, then the sales value has to be recognise accordingly. The issue requires examination and verification at the end of the AO according to the percentage of completion method consistently and regularly followed by the assessee and accepted by the department. Therefore, this issue is restored to the file of the AO for a fresh adjudication after affording due opportunity of being heard to the assessee.

  Alleged interest amount relates to prior period however, it was accrued and crystallised during the financial period under consideration and entire amount was paid to Gilt was parted after deduction of tax at source and same amount was offered to tax by the recipient Gilt Facilities P. Ltd - HELD THAT:- From the copies of the agreement dated 16.8.1995 and correspondence between the assessee and M/s Gilt Facilities P. Ltd, it is clear that the issue of interest was raised and settled during F.Y. 2000-01 and the assessee paid interest to M/s Gilt Facilities P. Ltd as per computation agreed between them. However, from the copy of the chart showing the calculation of total interest amount paid by the assessee to M/s Gilt Facilities P. Ltd reveals that the impugned amount was related to prior period but during the prior period there was no occasion for the assessee to claim the same as expenditure because this liability was accrued and crystallised after long conversation and correspondence with the Gilt Facilities P. Ltd as per agreement dated 16.8.1995 and the assessee paid amount after deduction of tax and the same was offered to tax by the recipient Gilt Facilities P. Ltd during A.Y 2001-01. We are unable to see any apparent mistake or ambiguity in the appellate order on this issue and thus we have no reason to interfere with the same.

  Depreciation @ 25% on golf course under the category of plant machinery as against 10% as allowable in the case of building which includes golf course - HELD THAT:- We observe that the ld. CIT(A) noted that golf course is a specialised superstructure on the land with various level undulation, holes, small points etc. as a specialised profession requirement for playing golf on the piece of land. Therefore cost of creating such technical requirement will certainly make the field of golf course as a plant.

  It is pertinent to note that for creation of golf course, landscaping is done for in various levels and some holes, ponds and walking path is created but in our humble understanding this kind of piece of land converted into a golf course by creating some specialised facilities for playing golf cannot be put in the category of plant and machinery.

  No hesitation to hold that the ld. CIT(A) granted relief to the assessee without any basis and without arriving to a conclusion as to whether golf course is a plant and machinery or building. Therefore, conclusion of the ld. CIT(A) is not sustainable as we are unable to see any basis for the factual observations noted by the ld. CIT(A) for putting the golf course in the category of plant. Since the issue has not been adjudicated by the ld. CIT(A) in a proper manner, therefore, this issue is restored to the file of the AO for a fresh adjudication after affording due opportunity of being heard to the assessee and without being prejudiced from earlier orders and our observations in this order.

  Facts regarding this issue have to be dealt in respect to golf course of 300 acres land and how it became plant and machinery attracting 25% depreciation. AO has to examine these detai ls to ascertain the issue between the parties as stated above. We also note that the assessee in its written submissions before the authorities below as well as before the Tribunal has submitted the details of construction on the 300 acres of land converting it into a golf course, but these details have not been submitted before the AO and the AO could not get an opportunity to verify and examine the same. Therefore, in our considered opinion, this issue requires detailed verification and examination at the end of the AO after affording due opportunity of hearing to the assessee and without being prejudiced from the earlier assessment and first appellate order

  Capital gain u/s 45 - HELD THAT:- CIT(A) was right in drawing conclusion that there was neither sale of land nor transfer of possession as per clause (i) to (v) of section 2(47) of the Act pertaining to sale of immovable property and he rightly concluded that these provisions covers a situation where registration of sale deed has been completed. As per clause (v) of section 2(47), any transaction involving the allowing of possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the Transfer of Property Act, 1882, but in the present case, the AO could not controvert this fact that the possession of the land in question was not transferred to the assessee and thus applicability of clause (v) of section 2(47) of the Act as part performance of contract cannot be inferred. On the basis of above discussion, we are unable to see any perversity, ambiguity or any other valid reason to interfere with the impugned order on this issue and thus we uphold the same. Since facts and circumstances of A.Y 2003- 04 on this issue are similar to A.Y 2001-02, therefore, our conclusion for A.Y 2001-02 would apply mutatis mutandis to A.Y 2003-04 also

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• 2016 (6) TMI 1372 - GUJARAT HIGH COURT
  

  Disallowance of deduction u/s 10B - claim allowed for initial assessment year - HELD THAT:- the provision envisaged is for a period of ten consecutive years commencing from the first year during which the undertaking begins to manufacture or produce articles, things or computer software, as the case may be. When the Revenue therefore, did not question the certification by the Director, Software Technology Park of India, in the initial year of the claim made by the assessee as well as in the subsequent years, it would not be open for the Revenue to pick one year out of a total of ten consecutive years for different treatment that too without offering any explanation for the same - Decided against revenue

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• 2016 (6) TMI 1371 - ITAT KOLKATA
  

  Disallowance u/s 40A(3) - cash payment exceeding or ₹ 20,000/- - whether payment made to the labourers in the instant case is in violation of provision of Sec.40A(3) ? - HELD THAT:- In the instant case, the genuineness of the payments has not been doubted. Besides the above we also find that from the submission made by AR that none of the case, the payment has exceeded more than ₹20,000/- and where the payment was exceeding more than ₹20,000/- it was paid to the sardars who further paid to individual labourers.

  DR has also failed to bring anything contrary to the argument placed by Ld. AR before us. Therefore in our considered view in none of case the payment in the instant case is inconsistent to the provision of section 40A(3) of the Act and taking a consistent view of the Co-ordinate Bench of this Tribunal in the case of Sri Manoranjan Raha [2016 (1) TMI 359 - ITAT KOLKATA] we are inclined to reverse the orders of Authorities Below. This ground of assessee’s appeal is allowed.

  Bogus purchases - HELD THAT:- AO disallowed the purchases from Mr Samiran Dutta on the ground that notice for verification was not served u/s. 133(6) of the Act but Ld. AR has produced the same before appellate stage for AY 2010-11. So the identity of the party (Mr. Samairan Dutta) cannot be doubted for instant case and for the year under consideration. The copy of the order of Ld. CIT(A) is placed at page 68 of the paper book. In this view of the matter and after considering assessment order for AY 2010-11, we are of the considered view that the party is not identifiable and so the purchase cannot be held bogus. Therefore we are inclined to reverse the orders of Authorities Below. This ground of assessee’s appeal is allowed.

  Remission and/or cessation of several accounts comprised u/s 41(1) - HELD THAT:- Certain old creditors are reflecting in the balance sheet of assessee and none of the sundry creditors was written off in the books of account of assessee. In our considered view the income cannot be brought to tax us/ 41(1) of the Act until and unless the trading liability ceased to exist in the books of account. In the instant case the liability of the sundry creditors is very much appearing. Therefore, the question of treating the same as income u/s 41(1) of the Act does not arise. - Decided in favour of assessee.

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• 2016 (6) TMI 1370 - ITAT DELHI
  

  Disallowance u/s 40(a)(ia) - amounts otherwise be allowable as a business expenditure - revenue’s submission is that since assessee did not make the entry in the P&L A/c in the year in which the liability actually accrued, therefore, the assessee’s claim is to be denied - HELD THAT:- We are not inclined to accept this proposition advanced by revenue for the simple reason that the real income of an assessee is to be determined as per the provisions of the Income-tax Act and not on the basis of entries made in the books of account. As per the proviso of section 40(a)(ia), admittedly, the deduction is allowable in regard to an expenditure only in the year in which the TDS amount has been deposited. There is no dispute on this count. Further, even if an assessee had not debited these expenses in the P&L A/c of earlier year that cannot be the basis for denying deduction which is otherwise admissible to assessee. We further find that section 40(a)(ia) does not mandate for any disallowance in earlier year for proviso to section 40(a)(ia) to come into operation.

  We find that the assessee’s claim is fully covered in the case of SMC Construction [2010 (1) TMI 10 - HIGH COURT OF DELHI] as held the amounts which may otherwise be allowable as a business expenditure as per the provisions of sections 30 to 38 and which is 'chargeable to tax in the hands of the recipient would not be allowed as a deduction unless requisite amount of tax has been deducted on the' said amount. Thus, mere passing a debit entry in the books of account, of these expenses would not be sufficient for claiming the deduction in the present account in the concerned year then also deduction would not be admissible unless tax has been paid on such amount. The proviso to section 40(a)(i) makes it clear that if tax has been deducted in the subsequent year and paid then deduction would be allowed in that year. Therefore, we are of the opinion that the learned first appellate authority has rightly deleted the disallowance. - Decided against revenue

  TP Adjustment - international transaction of payment of interest on external commercial borrowings of ₹ 3,32,11,250/- - interest had been paid to BT plc. @ 9.72% - HELD THAT:- Admittedly the external commercial borrowings, made by assessee, are denominated in the Indian currency. Therefore, for bench marking the interest rate paid by assessee @ 9.72%, the prevailing PLR in India, was to be applied and not the 6 months GPB LIBOR in view of the decision of Cotton Naturals (I) (P) Ltd. [2015 (3) TMI 1031 - DELHI HIGH COURT] . Since, the interest paid by assessee is much less than as per PLR, therefore, no adjustment is called for. In the result, this ground is allowed.

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• 2016 (6) TMI 1369 - ITAT BANGALORE
  

  Adjustment made u/s 92CA - HELD THAT:- As regards adjustment made u/s 92CA of the Act, we are of the considered opinion that in the immediately preceding assessment year i.e. 2010-11, DRP deleted the addition on account of interest payment to AE in identical circumstances. We do not find any reason to take a different view in the current assessment year. Accordingly, we direct the TPO to follow the directions given by the DRP in the assessment year 2010-11 for this year also.

  Disallowance of the claim u/s 80JJAA - AO has disallowed the claim by holding that the assessee company had not employed new employees more than 100 during the previous year relevant to assessment year under consideration - HELD THAT:- On a perusal of the provisions of section 80JJA of the Act, which is extracted below, we do not find that any such condition is imposed in the said provision. As requires to be satisfied that all other conditions mentioned in provisions of section 80JJA are fulfilled before allowing deduction u/s 80JJA of the Act. Therefore, this ground of appeal is also rest

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• 2016 (6) TMI 1368 - ITAT BANGALORE
  

  Jewellery declared under VDIS Scheme after converting it to bullion - HELD THAT:- All the items which were appearing in bill issued by M/s. Balaji Refinery were also mentioned in the valuation report filed in support of the VDIS declarations. Gross weight also tallies. Purchase invoice issued by the concern which purchased the gold and diamonds also shows the same weight of bullion as mentioned in the bill of M/s. Balaji Refinery and same caretage of diamonds mentioned in the valuation report. Case of the Revenue is that M/s. Balaji Refinery, which melted the ornaments and the concern to which the gold / bullion were sold were not found in Keshavpur, Hubli.

  Assessees were repeatedly questioned about this during the course of second round of proceedings. Inspector’s report relied on by the AO was based on an enquiry done more than 15 years after the event. There was no way assessees could ensure that M/s. Balaji Refinery continued to do its business all through. Much reliance has been placed by the AO on a letter issued by Gold and Silver Refinery Welfare Association, Hubli, wherein it was mentioned that no refinery called M/s. Balaji Refinery, did any refinery work in Hubli since 15 years.

  It is not necessary that every refinery should be a member of an association. A glance at the bill issued by M/s. Balaji Refinery does show that it was holding a licence. A Look at the purchase bill issued by the concerns show that they were having KST and CST registration numbers. In the case of M/s. Hunney Exports even their PA Number was there.

  These evidence do tilt the case in favour of the assessees. Assessees had done whatever possible, within their means to show that the gold and diamond sold by them were the same gold and diamond declared in VDIS, after conversion. Assessees had submitted copies of bills issued by M/s. Balaji Refinery which did show similar details of gold and diamond as returned in the VDIS. We are of the opinion that assessee had discharged their onus to show that the gold and diamond sold by them were the same which were declared by them in the VDIS declarations. Reasoning given by the AO that antique jewellery would not have been sold by the assessee is only a surmise and cannot dislodge the evidence filed by the assessee. Further there is nothing on record to show that the gold jewellery which were sold by the assessee were antique in nature. Lower authorities fell in error in disbelieving the source for credits shown by the assessee concerned. No hesitation in deleting the additions made in the hands of the assessee. - Appeals of all the assessee stand allowed.

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