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Income Tax - Case Laws
Showing 1 to 20 of 892 Records
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2019 (7) TMI 2036
Reopening of assessment - Validity of second notice of reassessment - scope of two parallel assessments - HELD THAT:- As decided in Marwadi Shares & Finance Ltd. [2018 (5) TMI 1547 - GUJARAT HIGH COURT] second notice u/s. 148 was issued by the AO without withdrawing the first notice issued by the AO u/s. 148. This was held that the law does not recognize two parallel assessments. It was held that in the absence of withdrawal of the first notice of reassessment, the proceedings would survive making the subsequent notice of reopening invalid.
In the present case, we have noted that second notice of reassessment was issued on 31.03.2015 whereas the assessment pursuant to first notice of reassessment u/s. 148 could have been made by the AO up to 31.03.2015 and therefore, it has to be accepted that second notice of re-opening u/s. 148 was issued during the pendency of first notice issued by the AO u/s. 148 and therefore, this judgment of Hon’ble Gujarat High Court is squarely applicable - we hold that the second notice of reassessment u/s. 148 issued by the AO on 31.03.2015 is invalid and therefore, the assessment framed by the AO pursuant to this notice of reassessment u/s. 148 is void-ab-initio. Assessee appeal allowed.
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2019 (7) TMI 2031
Maintainability of appeal on low tax effect in ITAT - Disallowance of Maintenance Charges deleted by CIT(A) - HELD THAT:- Admittedly, the tax effect in the Departmental Appeal is less than Rs.20 lakhs. Vide Circular No. 3 of 2018 dated 11.07.2018 issued by Central Board of Direct Taxes (CBDT) under section 268A of the I.T. Act, it has been directed that Department shall not file appeal before the Tribunal in case where the tax effect does not exceed the monetary limit of Rs.20 lakhs. It is also directed that this instruction will apply retrospectively to the pending appeals and appeals to be filed henceforth in the Tribunal.
It is also directed in this Circular, that pending appeals below the specified tax effect may be withdrawn/not pressed. CIT(DR), who appeared on behalf of Revenue, did not press the appeal in view of the aforesaid Circular of CBDT. We may also note that this appeal of Revenue would not fall within the exceptions provided in the aforesaid Circular. In the result, the Departmental Appeal is not maintainable, in view of aforesaid CBDT Circular. The Appeal of Revenue is dismissed as withdrawn/not pressed by the Ld. CIT(DR).
Revenue will be at liberty to file a miscellaneous application seeking recall of this order for restoration of the appeal, if it is found that the appeal of Revenue is not covered by aforesaid CBDT Circular.
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2019 (7) TMI 2030
TP Adjustment on Payment of Royalty - HELD THAT:- Since the facts of the impugned assessment year are identical to the facts of the preceding assessment year, therefore, following the order of the Tribunal in assessee’s own case for the immediately preceding assessment years, we restore the issue to the file of the A.O./TPO with a direction to decide the issue afresh [2018 (7) TMI 2348 - ITAT DELHI] and in accordance with the law in the light of the directions of the Tribunal. The ground of appeal No.2 raised by the assessee is accordingly allowed for statistical purposes.
TP adjustment in respect of the realization of receivables from the AEs considering the same to be an international transaction of loan - No adjustment is required on account of interest on receivables. We accordingly set aside the order of the AO/TPO/DRP and direct the A.O. to delete the disallowances so made. The grounds of appeal on this issue are accordingly allowed.
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2019 (7) TMI 2026
Reopening of assessment u/s 147 - proceedings made after completing of 4 years - AO had received information from Investigation Wing Mumbai as assessee had indulged in bogus transaction - HELD THAT:- As in the case of Amit Polyprints (P) Ltd. [2018 (5) TMI 1845 - GUJARAT HIGH COURT] wherein it was held that where reassessment proceedings were initiated on the basis of information received for Investigation Wing that the assessee had received certain amount from shell companies working as an accommodation provider, reassessment could not be held unjustified.
Similarly, in the case of Aradhna Estate (P) Ltd. [2018 (2) TMI 1534 - GUJARAT HIGH COURT] held that where reassessment proceedings were initiated on the basis of information received from Investigation Wing that the assessee had received certain amount from shell companies working as an accommodation entry provider, merely because these transaction were scrutinized by AO during original assessment, reassessment could not be held unjustified.
AO has in his possession a credible information that income chargeable to tax has escaped assessment hence proceedings u/s. 147 r.w.s.148 has been correctly initiated. Therefore, the contention and arguments raised by the learned counsel for the assessee are not sustainable in law. Accordingly, the validity of reopening of assessment is held to be sustainable in law, and therefore, upheld. Consequently, Ground No. 1 of the appeal is therefore, dismissed.
Estimation of income - bogus purchases - HELD THAT:- We observe that the assessee has failed to substantiate the purchases by not producing the parties in question and admission of the party that they have indulged in providing bogus accommodation entries - In the light of above facts and circumstances and considering the net profit of 5% as the average rate of the industry as observed as in the case of Mayank Diamonds Pvt. Ltd. [2014 (11) TMI 812 - GUJARAT HIGH COURT] we deem it fit to restrict the addition to 5% of total bogus purchases. Accordingly, addition @ 5% is sustained as against the addition sustained by the Ld. CIT(A) and balance is deleted. Accordingly, Ground No. 2 to 4 of appeal of the assessee are therefore, partly allowed.
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2019 (7) TMI 2025
Reopening of assessment u/s 147 - bogus purchase received - credible information from the DGIT (Inv.), Mumbai, indicating that the assessee had received accommodation entries - HELD THAT:- The sufficiency of material at this stage in determining whether commencement of proceedings u/s 147(a) was valid, what was to be seen was only the prima facie material; the sufficiency or correctness of the material was not a thing to be considered at that stage.
In the case of Phool Chand Bajrang Lal [1993 (7) TMI 1 - SUPREME COURT] held that one of the purposes of section 147 is to ensure that a party cannot get away by willfully making a false or untrue statement at the time of the original assessment and when that falsity comes to notice, to turn around and say: "You accepted my lie, now your hands are tied and you can do nothing." It would be a travesty of justice to allow the assessee that latitude. further relied in the case of Pramamount Communication (P.) Ltd. [2017 (7) TMI 621 - SC ORDER] affirming the judgement of Paramount Communication (P.) Ltd. [2017 (4) TMI 188 - DELHI HIGH COURT] held that Information regarding bogus purchase by assessee received by DRI for CCE which was passed on to the revenue authorities was “tangible material on record “to initiate valid reassessment proceedings.
Our view is further supported by the judgement of Amit Polyprints (P) Ltd. [2018 (5) TMI 1845 - GUJARAT HIGH COURT] wherein it was held that where reassessment proceedings were initiated on the basis of information received for Investigation Wing that the assessee had received certain amount from shell companies working as an accommodation provider, reassessment could not be held unjustified.
In the case of Aradhna Estate (P) Ltd. [2018 (2) TMI 1534 - GUJARAT HIGH COURT] held that where reassessment proceedings were initiated on the basis of information received from Investigation Wing that the assessee had received certain amount from shell companies working as an accommodation entry provider, merely because these transaction were scrutinized by AO during original assessment , reassessment could not be held unjustified.
AO has in his possession a credible information that income chargeable to tax has escaped assessment hence proceedings u/s. 147 read with section 148 of the Act has been correctly initiated. Therefore, the contention and arguments raised by the learned counsel for the assessee are not sustainable in law. Accordingly, the validity of reopening of assessment is held to be sustainable in law, and therefore, upheld. Consequently, Ground No. 1 of the appeal is therefore, dismissed.
Estimation of income - bogus purchases - HELD THAT:- As decided in Deluxe Diamonds [2018 (4) TMI 1892 - ITAT SURAT] wherein the Tribunal has restricted the estimation of 5% of bogus phases and not of entire purchases disclosed in books of accounts by the assessee by following decision of Mayank Diamonds Pvt. Ltd [2014 (11) TMI 812 - GUJARAT HIGH COURT] Therefore, in the light of above facts and circumstances and considering the net profit of 5% as the average rate of the industry as observed by the Hon`ble Jurisdictional High Court and following the judicial pronouncements by the Co-ordinate Bench of Tribunals and the decision in the case of Mayank Diamonds Pvt. Ltd [2014 (11) TMI 812 - GUJARAT HIGH COURT] we deem it fit to restrict the addition to 5% of total bogus purchases Accordingly, addition @ 5% is sustained as against the addition sustained by the CIT (A) and balance is deleted. Accordingly, Ground of the assessee are therefore, partly allowed.
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2019 (7) TMI 2022
Violation of principle of natural justice - lack of cross examination provided - addition made on the basis of the information received from the Investigation Wing - HELD THAT:- Issue decided in favour of assessee as relying on case of Amitabh Bansal [2019 (2) TMI 1132 - ITAT DELHI] in which exactly similar issue has been dealt by the Tribunal and decided that when revenue strongly relies on statements of certain persons to implicate an assessee, principle of cross examination has to invariably followed if truth and justice needs to be found out, which has not been done in the case of the assessee.
Thus the issue of cross examination in dispute is squarely covered in favour of the assessee by the findings of the Tribunal, as reproduced above. Appeal of the assessee is allowed.
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2019 (7) TMI 2019
Validity of order passed by the Settlement Commission - Revenue submits that the Settlement Commission has wrongly allowed deductions u/s 80-IA (4) as the returns were filed after the period prescribed by law - HELD THAT:- It is observed that the issue of filing of returns after the date prescribed by law was taken up by the respondent before this Court in M/S DILIP BUILDCON LTD. VERSUS UNION OF INDIA & OTHERS [2016 (7) TMI 215 - MADHYA PRADESH HIGH COURT] allowed the petition setting aside the order passed by the Central Board of Direct Taxes and condoned the delay on the part of the respondent in filing returns.
Admittedly, the order passed by this Court [supra] has attained finality as the same has not been assailed or challenged by the petitioner before any higher Court. Thus the issue regarding delay in filing the return does not survive and has been finally settled in favour of the respondent.
In view of the order passed by this Court, the contention of the learned counsel for the petitioner that the Settlement Commission has wrongly allowed deductions under Section 80- IA (4) of the Act, without taking into consideration the aspect of delay, has no merit and does not survive for either being raised or adjudicated.
Also contention of revenue that the respondent was only involved in construction of roads as a contractor and, therefore, as he was only a works contractor, the benefit of the provisions relating to work undertaken for infrastructural development would not have been availed by the respondent and has wrongly been allowed by the Settlement Commission, is to be rejected as Settlement Commission has discussed these aspects extensively - The aforesaid finding in favour of the respondent, is a finding of fact and does not warrant any interference by this Court in writ proceedings.
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2019 (7) TMI 2003
Exemption u/s 11 - assessee received corpus contribution from Govt. of India and corpus contribution from SIDBI - charitable activity u/s 2(15) - AO held receipts are liable to be taxed as income u/s 2(24)(iia) of the Act and accordingly passed assessment order u/s 143 (3) - Whether assessee performs charitable activities within the meaning of proviso to section 2(15)? - as per DR the activities of the assessee are akin to those of a mutual association and do not fall within the definition of charitable purposes - HELD THAT:- As decided in assessee own case for the AY 2010-11. [2017 (1) TMI 1145 - ITAT MUMBAI] prescribed in the trust-deed that the Government of India was liable to make up the deficit, if any, incurred in the overall operation of the scheme by providing the necessary budgetary support to the Trust. It is also prescribed in the trust-deed that the entire income arising out of corpus fund shall be spent towards fulfilling the objectives of the Trust and even savings effected in any year were to be transferred to the corpus fund to be spent towards fulfilling the objectives of the Trust. The trust- deed also prescribes the manner in which the scheme is to be implemented and it also provides for a Board of Trustees, whereby the Chairman & Managing Director of SIDBI is to be its Ex- officio Chairman and other members being drawn from the officials of the Government of India. The Management and administrative affairs of the Trust are under the overall supervision and superintendence of the Board of Trustees.
Thus object and purpose of the Trust is focussed on small scale industries and micro enterprises and is not available to entrepreneurs at large. Apart there-from, it is also prescribed in the scheme operationalized by the Trust that the benefits are to be made available only to credit facilities aggregating upto Rs.10.00 lacs sanctioned and disbursed by the lending institutions.
Therefore, considering the focused area of the Trust, it could not be inferred that there is any profit motive so as to view the activities to be 'trade, commerce or business as understood for the purposes of proviso to section 2(15) of the Act. Therefore, in our considered opinion, on facts, it is not possible to infer that assessee Trust is carrying on any regular 'trade, commerce or business' and on the contrary it is an entity which is essentially existing for charitable purposes but conducting some activities for consideration or fee. In this background, the proviso to section 2(15) of the Act cannot be invoked to exclude assessee Trust from the purview of section 2(15) of the Act since the said proviso only seeks to exclude institutions which are carrying on regular business cannot be invoked to exclude assessee Trust from the purview of section 2(15) of the Act since the said proviso only seeks to exclude institutions which are carrying on regular business - Decided in favour of assessee.
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2019 (7) TMI 2002
Deduction u/s 80IA - losses of eligible unit of years earlier to the initial year opted - HELD THAT:- As decided in own case A.Y. 2012-13 and also the decision of Velayudhaswamy Spinning Mills (P) Ltd. [2010 (3) TMI 860 - MADRAS HIGH COURT] as held that the claim of the appellant for deduction is well within the spirit of the law and accordingly hereby direct the AO to allow the claim for deduction made by the appellant company U/s.80IA(4) - Decided in favour of assessee.
Disallowance u/s 14A r.w.r.8D - Sufficiency of own funds - AO had noted that the assessee has claimed interest expenses which includes general interest remaining interest / bank interest considered as directly related to the export / import and assessee did not make any disallowance u/s.14A - HELD THAT:- We find from the order that the ld.CIT(A) that the assessee is having a owned funds to the extent of 436 crores as on 31.03.2013 investments made by the assessee to generate the exempt income only to the extent of 8.05 crores. Therefore, the ld.CIT(A) reasonable presumed that assessee has invested only own funds no borrowed funds. By considering the facts and circumstances of the case, we find that there is no error passed in the order passed by ld.CIT(A), in deleting addition - Decided in favour of assessee.
Disallowance of commission in respect of turnover of earlier years - assessee has explained before the Assessing Officer that the commission expenditure accounted for as and when debit note is raised by the broker - HELD THAT:- On appeal, the ld.CIT(A) gave a finding that the expenses incurred by the AO is not doubted by the AO and only case of the AO is that these expenses relates to earlier years not related to current year. We find that the ld.CIT(A) after considering the detailed explanation given by the assessee and also observations made by the Assessing Officer gave a find that these expenses are genuine and has to allowed even in current year also. We find no reason to interfere with the order passed by the ld.CIT(A), therefore this ground raised by the Revenue is dismissed.
Disallowance of welfare expenses - AO noted that the assessee has not fully vouched and some of the expenses were supported by the handmade vouchers not having complete address and names of the recipient - CIT(A) restricted the disallowance to 50% - HELD THAT:- As CIT(A) partly granted the relief to the assessee, we find no reason to interfere with the orders of passed by the ld.CIT(A), therefore this ground of appeal raised by the Revenue is dismissed.
Allowability of expenses related to conveyance and traveling, motor car expenses, telephone expenses, membership fee expenses - CIT(A) restricted from 15% to 10% granted relief to the assessee - HELD THAT:- We find that the relief granted by the ld.CIT(A) by restricting disallowance from 15 % to 10% is reasonable and justified and no interference is called for. Therefore, ground raised by the Revenue is dismissed.
Allowable business expenditure - Interest paid on delayed payment of service tax is in penal nature - HELD THAT:- We find that the expenditure incurred to the assessee during the course of the business and therefore which has to allowed as a business expenditure. In view of the above, we find no reason to interfere with the orders passed by the ld.CIT(A), therefore ground raised by the Revenue is dismissed.
Disallowance of staff welfare expenses - HELD THAT:- CIT(A) by considering the entire business carried by the assessee and also by considering the nature of the expenses and also considering the expenses incurred in various places restricted the allowance to 50% granted - We find that no reason to interfere with the order passed by the ld.CIT(A).
Disallowance on account of office expenses - HELD THAT:- We find that the claim of the assessee is that he had incurred office expenses in respect of three office at Surat, Delhi and Mumbai and four divisions of factories. Most expenses incurred by the assessee has submitted by the ld.Counsel for the assessee incurred by the cheque whenever payment made by cash, the same is supported by the vouchers. The ld.CIT(A) by considering all the facts and examine the details he has restricted the disallowance we find no reason to interfere with the order passed by the ld.CIT(A), therefore ground raised by the Revenue is dismissed.
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2019 (7) TMI 2000
TDS u/s 194H - amount retained by the banks/credit card agencies for rendering credit card processing service - HELD THAT:- It’s not the case of the Revenue that the decision of JDS Apparels [2014 (11) TMI 732 - DELHI HIGH COURT] wherein held Section 194H would not be attracted has no obligation to the facts of the case.
When there is no relationship of principal between the assessee and the banks and the bank has no obligation to deduct TDS in respect of the amounts retained by the banks towards the service charges. We, therefore, while accepting the contention of the assessee upheld the order passed by the ld. CIT(A) and dismiss the appeal of the Revenue.
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2019 (7) TMI 1999
TP Adjustment - PLI of the assessee as determined by the TPO is 6.01% against the PLI of 8.90% of the comparables - HELD THAT:- On the facts relating to the PLI of the assessee, the TPO/Assessing Officer erroneously considered the PLI figure of 3.87% instead of 6.01%. This errors gave rise to the TP adjustment of Rs. 4,94,95,000/-. If the figure of 3.87% is considered, there shall be no TP adjustment warranted in view of the benefits of +/-5%.
Assessee submitted that this fact can be verified at the level of the AO/TPO.
Considering the said factual position and subject to the verification of these claims of the assessee by the Assessing Officer, the figure of 6.01% should be taken as PLI of the assessee at the entity level. In that case, no adjustments are required in view of the facts that the average of PLI of the comparables qua the assessee’s profits margin, fall within the range of +/-5% of the ALP. TPO/Assessing Officer is directed to verify the above figures of PLI of the assessee after giving opportunity to the assessee as per the settled principles of natural justice.
Prior period expenses - treating the rebate allowed to a customer as prior period expense and thereby disallowing the same - HELD THAT:- As evident that the relevant sales took place and duly accounted in the books in the assessment year 2005-06 and the assessee made an adjustment by way of rebate to the same in the current assessment year 2006-07. The income-tax authorities disallowed the claim of rebate in sales for want of the evidences leading to the grant of such rebate in sales and booking the same in the year under consideration. The assessee could not improve his case even before us.
Considering the same, we are of the opinion, the order of the DRP and the AO is fair and reasonable on this issue and it does not call for any interference. Accordingly, the relevant ground relates to the corporate addition is dismissed.
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2019 (7) TMI 1997
Reopening of assessment u/s 147 - Correct Assessment Year - assessee alleging that the A.O. has recorded the reasons to believe that the income of the assessee has escaped assessment for assessment year 2014-15, whereas on the basis of said reasons recorded, the assessment for the year under consideration i.e. assessment year 2010-11 has been reopened - HELD THAT:- We find that in the Performa, which was sent by the A.O. to the Principal Chief Commissioner of Income Tax, Panchkula seeking permission to issue notice u/s 148 of the Act to the assessee, assessment year has been mentioned “assessment year 2010-11”.
A.O. recorded the reasons second time on 28.10.2015 wherein though in the title the assessment year has been mentioned as “assessment year 2014-15”, however, from the reading of the entire document it is apparent that the A.O. has mentioned the assessment year 2010-11. The mention of the assessment year 2014-15 in the title, in our view, is a clerical mistake. Moreover, the Ld. DR has also invited our attention to the copy of the order sheet entry dated 15.12.2015 to show that the copy of the reasons recorded was duly supplied to the assessee. Even the assessee has also placed on record the copy of the application dated 11.12.2015 moved by the Chartered Accountant of the assessee to supply the copy of reasons recorded, which were duly supplied to the assessee.
Whether assessment reopened after the expiry of four years from the end of the relevant assessment year and that there was no failure on the part of the assessee to disclose fully and truly all material facts? - A perusal of the reasons recorded by the A.O. reveals that the A.O. has disputed eligibility of the assessee to claim deduction u/s 35AD of the Act. During the assessment proceedings for assessment year 2012-13, the A.O. noticed that the assessee had claimed deduction u/s 35AD of the Act while the assessee had been running its business for so many years.
A.O. was of the view that the deduction u/s 35AD of the Act could be allowed only for prior period of commencement of the specified business.
There is no allegation that the assessee had not fully and truly disclosed all the material facts for making the assessment. The assessee had claimed deduction u/s 35AD of the Act disclosing all the particulars. It is only of the interpretation of the relevant provisions of section, on the basis of which, A.O. formed the opinion during assessment proceedings for assessment year 2012-13 that the deduction to the assessee u/s 35AD of the Act was wrongly allowed for the assessment year under consideration. However so far as the assessee is concerned, the assessee on its part had disclosed fully and truly all the material facts necessary for its assessment.
The case is squarely hit by the 1st proviso to section 147 of the Act since the reopening in this case since has been made after the expiry of four years from the end of the relevant assessment year. In view of our above observations, this ground of appeal of the assessee is allowed and reopening of assessment is set aside and the consequential assessment made is quashed.
Deduction u/s 35AD - as per AO as assessee had existing business of warehousing and hence, it could not be said that the assessee had commenced the business of warehousing during the year under consideration, therefore, disallowed the deduction - As decided in assessee own case [2019 (3) TMI 2037 - ITAT CHANDIGARH] an assessee is eligible to claim deduction of the capital expenditure if such an expenditure has been incurred wholly and exclusively in a specified business. There is no condition of any date or year of commencement of specified business.
In the second part, it has been provided that if such an expenditure has been incurred prior to the commencement of business and has been duly capitalized in the books of account, the claim will be allowed in the year in which the assessee commences operations of his specified business. There is neither any overlapping nor any contradiction in the aforesaid provision. The assessee is covered in the first part i.e. the assessee has incurred the expenditure on the specified business during the year in which operations of his business of warehousing were already going on. We do not find any justification on the part of the lower authorities in denying the deduction to the assessee u/s 35AD - Decided in favour of assessee.
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2019 (7) TMI 1996
Addition u/s.68 for unsecured loans taken - HELD THAT:- The assessee has discharged the onus of proving the creditors and the Revenue did not make required enquiries. The balance sheet and the business affairs clearly prove the financial capability of the lenders - As decided in the case of Vaibhav Cotton Pvt. Ltd. [2012 (8) TMI 1129 - MADHYA PRADESH HIGH COURT] held that where the Tribunal on its independent analysis of the matter had reached the factual conclusion about genuineness of unsecured loan transaction and in this process Tribunal has taken note of fact that detailed account of concerned party were filed by the assessee and entries in account were through account payee cheques, source of deposit in the bank was not in dispute and identity of the parties was established and also creditworthiness of the creditors was established, it was right to hold that the loans taken cannot be assessed u/s 68 of the Act. Hence we hereby delete the addition made on account of loans received by the assessee.
Revenue has invoked the provisions of Section 115BBE - We find that the section has been amended w.e.f. 01.04.2017 which is prospective and hence not applicable to the year in question before us. Since, the additions have been deleted the applicability of the section to the case would be superfluous.
Appeal of the Revenue is dismissed.
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2019 (7) TMI 1995
Disallowance u/s 40A(3) towards payments made in cash exceeding ₹.20,000/- - purchase of raw skins from various suppliers - AO held that the assessee had not made any direct purchases from the butchers but had purchased from other established traders and therefore did not accept the assessee’s claim of exemption under Rule 6DD(f) and also rejected the claim of exemption under Rule 6DD which exempts payments made to agents on behalf of the buyers for the reason that the said parties from whom the assessee purchased were not agents, but were traders themselves - HELD THAT:- The remand report of AO was received by the CIT(A) on 02.08.2018, wherein, we find that the AO has reiterated what was available in the assessment order and nothing more than that after retention of the additional evidences, surprisingly, for nearly eight years and the reason for that may be best known to him.
On perusal of the remand report, as reproduced in the appellate order, the only contention of AO is that the suppliers from whom the assessee had purchased hides and they are not butchers. Even though it was purchased from those suppliers, those suppliers would have purchased from the butchers only and there is no other go and nothing is prevented the supplier to function as an agent for supplying the hides to the assessee.
Generally, the suppliers/ exporters of finished leather purchase the raw material from the butchers on cash basis and to safeguard them, the Legislature intended to make a provision under Rule 6DD(k) that “where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person”. There is no hard and fast rule that the agent should not be a supplier. In view of the above facts, we delete the addition made u/s 40A(3) of the Act. Appeal filed by the assessee is allowed.
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2019 (7) TMI 1992
TP adjustment for payment of royalty - trademark royalty paid to Cadbury Schweppes Overseas Limited[CSOL] Assessee is a listed company engaged in manufacturing and marketing of malted food and drinks and chocolates - Cadbury India had entered into Technical Assistance and Royalty Agreement with AE M/s. CSOL for availing itself of the benefits of the said technical know-how developed by CSOL relating to the manufacturing, processing, distributing and marketing of products as well as the benefits of the continuing research and development undertaken by CSOL - HELD THAT:- It transpires that this issue was earlier remitted by the Tribunal to the TPO. However, learned Counsel of the assessee submitted that in the last year there was issue of fresh documents. He submitted that this year all documents are there. He submitted that the TPO has held that arm's length price should be nil without applying any material. Learned counsel claimed that the TPO has held that no benefit accrues to the assessee. Learned counsel referred to several case laws for the proposition that benefit test is not for TPO.
As we note that this Tribunal in assessee's own case for A.Y. 2006-07 [2018 (11) TMI 1762 - ITAT MUMBAI] hold that the royalty payment on trade mark to SCOL @ 1% of net sales is at arm's length, hence, no further adjustment is required. Accordingly, we delete the disallowance made by the Assessing Officer.
We note that the AO as well as learned CIT(A) have also based their decision on their earlier orders. Since ITAT has considered those orders and remitted the issue to the file of the Assessing Officer, we deem it appropriate to follow the precedent and set aside the issue to the file of the Assessing Officer. The Assessing Officer is directed to consider the issue afresh keeping in mind additional submissions being made by learned counsel.
Disallowance of payment of royalty on technology paid to Cadbury Adams USA LLC. - HELD THAT:- As decided in own case A.Y. 2006-07 [2018 (11) TMI 1762 - ITAT MUMBAI] assessee has also availed technical know-how from CAUSA. Further, the Departmental Authorities don dispute the genuineness or authenticity of the amended agreement. What they are disputing is the date from which the amended agreement is effective. If the departmental authorities in the subsequent assessment years have allowed payment of royalty both for trademark and technical know-how, there is no reason why it should not be allowed in the impugned assessment year, since, it cannot be said that the assessee was manufacturing 'Halls' brand products without obtaining the required technical know-how. Accordingly, we hold that payment of royalty to CAUSA is at arm's length. The ground is allowed.
Disallowance of service fees paid to Cadbury Schweppes Asia Pacific Pte. Limited. - HELD THAT:- As on careful consideration we find that learned CIT(A) in this case has followed his earlier order of previous assessment year. It was this order of learned CIT(A) which was remitted by the ITAT to the file of the TPO for examination with direction. In these circumstances in our considered opinion the issue needs to be remitted to the TPO with the same directions as above. We order accordingly.
Disallowance of depreciation on marketing know-how in pursuance of worldwide stock and asset purchase agreement between Pfizer US and Cadbury UK. - HELD THAT:- Tribunal in assessee's own case for A.Y. 2006-07 [2018 (11) TMI 1762 - ITAT MUMBAI] has decided this issue and allowed the claim of the assessee following the consistent view of the Tribunal on this issue in assessee's own case in the preceding assessment years, we allow assessee's claim of depreciation
Determining profits eligible for deduction u/s 80-IC - Allocation of expenditure at Baddi unit - HELD THAT:- We agree with the submissions of the learned counsel of the assessee, as regards allocation of interest, voluntary retirement scheme and decrease in stock. As agreed by learned counsel above the fact that no VRS expenditure pertains to the employees of Baddi unit may be checked by the Assessing Officer.
As regards operation/establishment expenses, we find considerable cogency in the allocation key used by the assessee for direct expenses, direct marketing cost and selling and distribution expenditure, royalty and technical fees. We approve the same subject to factual verification by the Assessing Officer. We find that the method of allocation of other overhead as mentioned above appears to be opaque. We remit the same to the Assessing Officer for verification.
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2019 (7) TMI 1983
Disallowance u/s 14A - as per Revenue he could disallow the expenditure even there is no income i.e., dividend by taking recourse to Rule 8D - as decided by HC there is no dispute that no income i.e., dividend, which did not form part of total income of the Assessee was earned in the relevant assessment year and the addition made by by relying upon Section 14 A was completely contrary to the provisions of the said Section.
HELD THAT:- There is delay of 324 days in filing the Review Petition for which no satisfactory explanation has been given. Even otherwise, we do not find any merit in the Review Petition. The Review Petition is dismissed on the ground of delay as well as merits.
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2019 (7) TMI 1981
Assessment u/s 153C - Unexplained deposit u/s. 68 - HELD THAT:- While dealing with the addition the Assessing Officer has mentioned that addition u/s. 68 was done on examination of balance-sheet. Similar is the position of addition of commission income. There is no whisper in the assessment order that any incriminating material was seized in respect of addition which has been done.
It is clear that search was conducted and assessment year involved A.Y. 2010-11 was not abated assessment. Hence on the touchstone in the case of Continental Warehousing Corporation [2015 (5) TMI 656 - BOMBAY HIGH COURT] no addition was permissible dehorse incriminating material found. Since no incriminating material has been mentioned with respect to addition made, we set aside the orders of the authorities below and delete the addition. Decided in favour of assessee.
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2019 (7) TMI 1980
Reopening of assessment u/s 147 - assessment made on protective basis - Substantial question of law - HELD THAT:- Undoubtedly, the court has to consider as to whether a substantial question of law arises in the context of reasoning of the ITAT in holding the deletion of protective assessment. What is apparent is that the AO in this case proceeded, without furnishing any reasoning and added amounts to assessee’s account imposing tax on it purely on protective basis after the substantive additions in respect of each amount which were made at third parties’ end.
CIT(A) in our opinion, was correct in his analysis noticing that as against documentary evidence available, only some additions could be sustained even in respect of such third parties. Consequently, in the absence of any reason to involve the present assessee, which had sold the lands to the third party and against whom there was no allegation of withholding material or suppression of facts, nor was anything incriminating recorded, no protective assessment could have been made. No substantial question of law arises.
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2019 (7) TMI 1978
TDS u/s 195 - payments made to non-resident professionals - Payments being FTS/FIS - HELD THAT:- As the payment in question were for FTS/FIS and this is not disputed by the assessee. This is also a finding given by CIT(A) in this para that assessee has not disputed that these services make available the technical knowledge to assessee in India.
Now as per the additional evidence filed before us, it is seen that these invoices are in respect of rendering of services to the assessee in respect of certain legal cases filed against the assessee in USA. If that is so then how it can be said that by rendering these services, the concerned parties had made available technical knowledge to assessee in India.
As per the invoices of M/s. Angeli Law Group LLC, the invoice is for professional charges for the month of March to October 2012, April 2013 and May 2013 in addition to that, there is commission payment. Thus additional evidence should be admitted and hence, we are admitting the same and restore the entire matter back in both years to the file of ld. CIT(A) for fresh decision. Appeals filed by the assessee are allowed for statistical purposes.
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2019 (7) TMI 1976
Disallowance of depreciation on the cost of know-how and intangibles acquired from ORG of their division of Adex Business purchased along with all assets and liabilities the compendious heading of Goodwill - HELD THAT:- As gone through the order of the Tribunal and noticed that this issue was not adjudicated. Assessee stated that he is only interested in recalling of the ground.
We are of the view that the issue raised by assessee has not been adjudicated. Hence, the same requires adjudication. Hence, qua ground No. 3 only, the appeal of assessee is recalled.
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