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Income Tax - Case Laws
Showing 101 to 120 of 889 Records
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2019 (7) TMI 1773 - ITAT MUMBAI
Additions towards cash payment u/s 69A for purchase of flats - assessee has failed to bring on record the source of cash of ₹ 1 crore paid to the M/s Nish Developers P. Ltd. - CIT(A) granting relief with regards to the additions made in the hands of third party - CIT(A) after considering relevant submissions of the assessee and also taken into account additional evidence filed by the assessee came to the conclusion that when the person who gave statement u/s 132(4), retracted from his admission by filing a sworn affidavit, the AO was erred in reaching to the conclusion that the assessee has paid cash for booking flat - HELD THAT:- AO has relied upon information received from DDIT (Inv.) as per which the CEO and trusted employee of M/s Nish Developers P.Ltd., in the statement recorded during search proceedings have admitted the fact of receiving cash for booking of flats. Except this, the AO has not carried out any independent enquiry to find out the truth in light of statement recorded from CEO of M/s. Nish Developers P.Ltd. towards cash payment made for bookings flats.
The assessee has also filed copy of purchase deed which was executed on 24/12/2013 and market value of the said flat has been determined by the Registrar at ₹ 2,72,20,000/- for the purpose of stamp duty. When the market value of the flat which was agreed to be purchased in 2010 for a purchase of price ₹ 2, 75,00,000/- is determined after more than three years by the Sub Registrar at ₹ 2,72,20,000/-, there is no reason for the AO to make additions towards alleged cash payment only on the basis statement of some persons, more particularly when the persons who gave such statements have been subsequently retracted statement by filing a sworn affidavit. The Ld. CIT(A) after considering relevant facts and also by following the decision of Hon’ble Supreme Court in the case of Shri. Kishanchand Chellaram [1980 (9) TMI 3 - SUPREME COURT] held that the AO has made additions without conducting any independent enquiry and solely on the basis of information received from DDIT (Inv.) without there being any further evidences to support his findings that a sum of ₹ 100 Lacs alleged to have been paid in cash by the assessee. We do not find any error in the findings of CIT(A) - Decided against revenue.
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2019 (7) TMI 1770 - ITAT DLEHI
Disallowance of expenditure u/s 14A - AO held that earning exempt income involves so many administrative expenses under several heads and it is not possible to believe that the assessee did not incur any expenditure whatsoever - HELD THAT:- As submitted by the ld. AR that for the earlier Assessment Year 2002-03, under similar set of circumstances, ld. AO disallowed 25% of the dividend income u/s 14A of the Act and it was directed to be reassessed by ld. CIT(A) by applying Rule 8D of the Rules but the Tribunal remanded the matter to the file of ld. AO for reconsideration taking into account the decision of the Hon’ble Delhi High Court in the case of Maxopp Investment Ltd. [2011 (11) TMI 267 - DELHI HIGH COURT].
We find such an order Tribunal reached a conclusion that the matter needs to be set aside to the file of the AO for reconsideration keeping in mind the decision of the Hon’ble Delhi High Court in the case of Maxopp. Investment Ltd. (supra). While respectfully following the same, we remand the issue to the file of the ld. AO to comply with the said directions.
Interest income - Income from other sources - on ICD, FD etc, interest on bill discounting to the tune and interest on employees’ loans and advances - HELD THAT:- As deposits for the purpose of obtaining the bank guarantee etc have nexus with the conduct of business by the assessee and are allowable, subject to the verification of such business nexus, as expenditure. However, we do not find any such probability or convincing reasons given by the assessee in respect of the ICD’s. We are, therefore, of the considered opinion that the treatment of interest derived from ICDs cannot be taken as business income and the learned Assessing Officer rightly treated it as income from other sources.
In respect of the interest on FD stands on a different footing and if the assessee is able to establish the nexus between the FD and the business, the interest derived from the transaction has to be treated as business income for the purpose of deduction under section 80 HHC of the Act. We, therefore, set aside the 7 findings of the Ld. CIT(A) on this issue and remand the same to the file of learned Assessing Officer for verification of the nexus between the FD and the business and if such nexus is established, to consider the same as business income for the purpose of Section 80 HHC of the Act.
Since the assessee had given the surplus funds to employees as a measure of incentive/perquisite, such an activity comprises of the business activity; that the source of such income is not activity of giving loan, but the benefit extended to 9 employees engaged in the business. The Tribunal observed that the first degree nexus of such income is the eligible business carried on by the assessee.
Since facts are similar, and in the absence of any explanation as to why and how the decision under similar circumstances in assessee’s own case has no application to the facts of this year, we find it difficult to take a different view and while respectfully following the reasoning given by the Tribunal [2017 (1) TMI 266 - ITAT DELHI], we conclude that the interest derived by the assessee on the loans provided to employees is inextricably linked to the business of the assessee and constitute business income for consideration under section 80 HHC of the Act.
Deduction claimed u/s 80IA in respect of captive power generating unit of the assessee situated at Gurgaon - We hold this issue in favour of the assessee and answer that the disallowance made by the ld. AO u/s 80IA of the Act in relation to the generation of power cannot be sustained. We accordingly allow this ground.
Transfer Price adjustment on account of international transaction of import of components - HELD THAT:- We find that out of the total purchases of ₹ 20,46,58,682/- from the domestic market, the assessee imported from associated enterprises the components worth ₹ 22,83,666/- which does not constitute any significant portion thereof. We, therefore, having regard to the directions given by the Tribunal for earlier years and the approach adopted by the ld. AO while deleting the addition on this score, hold that the transfer pricing adjustment to the tune of ₹ 7,05,334/- made by the TPO cannot be sustained and accordingly while allowing the ground delete the same.
Expenditure incurred on account of Royalty, model fee and provision for warranty in respect of the sales - HELD THAT:- As the issue has been consistently decided in favour of the assessee for more than 13 years and also upheld by the Hon’ble jurisdictional High Court, the same approach has to be adopted in this case also and, therefore, while respectfully following the consistent view taken by the Tribunal and approved by the Hon’ble High Court, we uphold the finding of the learned CIT(A).
Disallowance of model fee at 25% paid during the year on the ground of it being capital in nature - as following the appellate orders for the earlier years, ld. CIT(A) deleted the same - HELD THAT:- In assessee’s own case for the AY 1996-97, the Tribunal took the view that the model fee paid by the assessee to Honda is allowable u/s 37(1) of the Act as revenue expenditure on the ground that the 16 payment was only for right to use the technology know-how and there was no ownership of the intellectual property which remains to be with the Honda. This view of the Tribunal was challenged by the revenue but the Hon’ble Delhi High Court decline to entertain the appeal and SLP against the same was also dismissed.
As brought to our notice that subsequently the same view is upheld by the Tribunal and the Hon’ble High Court affirmed the same. Hon’ble Supreme Court also declined to interfere with the same. By latest order [2019 (4) TMI 1509 - ITAT DELHI] for the Asstt. Year 2009-10, the Tribunal reaffirmed the said view. For quite a long time there is consistency in the view taken by the Tribunal as upheld by the Hon’ble jurisdictional High Court and Hon’ble Apex court. Therefore, the issue is no longer res integra and is in favour of the assessee.
Disallowance on account of provision for warranty made in respect of sales during the year - HELD THAT:- For the Asstt. Year 2002-03, while following the decision of the Hon’ble Apex Court in the case of Rotork Controls India Ltd. vs CIT,[2009 (5) TMI 16 - SUPREME COURT], the Tribunal deleted the addition and subsequently, similar addition was disallowed in respect of Asstt. Years 1999-2000, 1996-97, 1997-98, 2006-07, 2007-08 to 2009-10 by several orders of the Tribunal, which are to be found place in the paper book. On a reading of these orders, we are of the considered opinion that the issue is fairly settled and there is no need to reopen the same for taking fresh view. Learned CIT(A) deleted the addition by following the appellate orders and, therefore, we do not find any perversity in such finding. We uphold the order of ld. CIT(A).
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2019 (7) TMI 1769 - ITAT MUMBAI
Disallowance of bad debt on account of “Bad Debt- NSEL" - whether claims were premature as final deficiencies in amount could not be arrived at as contemplated u/s 36(2)(ii) of the Act? - CIT (A) deleted the disallowance made by the AO - HELD THAT:- CIT (A) has based his findings on the judgment of the Hon’ble Supreme Court in the case of TRF Ltd.[2010 (2) TMI 211 - SUPREME COURT] has held that it is enough if the bad debt is written off as irrecoverable in the accounts of the assessee. The Ld. CIT (A) has further referred the Circular No. 12/2016 dated 30.05.2016 in which it has been mentioned that in view of the judgment of TRF Ltd. vs. CIT, claim for debt or part thereof in any previous year shall be admissible u/s 36(1)(vii) of the Act, if it is written off as irrecoverable in the books of account of the assessee for that previous year and it fulfills the conditions of stipulated in sub-section 2 of section 36(2)
CIT (A) has specifically mentioned that it is not the case of revenue that any of the conditions either u/s 36(1)(vii) or section 36(2) of the Act are not fulfilled by the assessee. Admittedly, the assessee has written off the bad debts in its books of account. In the light of the aforesaid facts, we do not find any legal or factual infirmity in the order passed by the Ld. CIT (A) to interfere with the same. Hence, we dismiss the sole ground of appeal of the revenue and uphold the findings of the Ld. CIT (A). Accordingly, we direct the AO to delete the addition. - Decided in favour of assessee.
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2019 (7) TMI 1767 - ITAT BANGALORE
Assessment of trust - Brought forward of excess application and carry forward of excess application of income of current year to subsequent years - HELD THAT:- Excess application of a charitable fund in a particular year is allowed to be carried forwarded to subsequent year for set off against any shortfall in spending in that year under the provisions of fact - expenses incurred by the trust in earlier years against the income earned by the trust in subsequent year will have to be regarded as application of income of trust.
Identical issue has been considered by Hon’ble Karnataka High Court in case of CIT (E) vs Ohio University Christ College [2018 (11) TMI 1055 - KARNATAKA HIGH COURT] wherein allowed claim of assessee - Decided against revenue.
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2019 (7) TMI 1766 - ITAT MUMBAI
Ex–parte order by CIT-A - non–appearance on the date of hearing of appeal, the learned Authorised Representative submitted, when the appeal was called for hearing on 11th October 2018, he was appearing before another Bench of the Tribunal - HELD THAT:- On a perusal of the material on record, it is seen that for the first time the appeal was fixed for hearing on 10th October 2018, and on the said date, at the request of the assessee, hearing of the appeal was adjourned to 11th October 2018. However, on 11th October 2018, since no one appeared for the assessee when the appeal wascalled for hearing, the Bench proceeded to decide the appeal ex–parte. After considering the submissions of the learned Authorised Representative that when the appeal was called for hearing, he was busy in another Bench and also taking note of the fact that the assessee has not taken many adjournments and the appeal was disposed of on the second date of hearing itself, I am inclined to recall the order dated 18th October 2018, and restore the appeal to its original position. The Registry is directed to fix the appeal for hearing before the assigned Bench in due course. Notice of hearing intimating fresh date should be issued to both the parties.
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2019 (7) TMI 1765 - ITAT DELHI
TP Adjustment - selection of MAM - most appropriate method for benchmarking import of Crystal goods and Crystal components - In respect of the Assessment Years 2007-08 to 2009-10, Ld. CIT(A) held that RPM is the most appropriate method for benchmarking the activities of the assessee in the import of Crystal and Crystal components - Bright Line Test (BLT) is sought to be applied - HELD THAT:- This Tribunal in assessee’s own case for the Assessment Year 2004-05 [2017 (2) TMI 691 - ITAT DELHI] direct the AO/TPO to determine the ALP of the transaction of Import of Crystal goods and Crystal components, firstly, by applying the RPM. It is hereby clarified that the manner of application of RPM is open at large before the TPO who will decide it in the way he thinks expedient. Contention of the ld. AR that the comparables should be restricted to the ten companies which it cited before the ld. CIT(A) or twenty companies which the ld. CIT(A) suomotu chose for making TP adjustment on account of AMP expenses, cannot be accepted. We do not intend to eclipse the power of the TPO by restricting the exercise, which he has yet to undertake for the first time. It is further clarified that if due to one reason or the other as discussed above, such a method cannot be applied, then, resort should be made to the TNMM in the way enshrined in rule 10B(1)(e) of IT Rules, 1962, taking care of the infirmities discussed above in the earlier calculation made by the TPO
Addition made on account of Software and Electronic Data Processing (“EDP”) charges - assessee incurred expenses towards IT support services which were categorised under Software and Electronic Data Processing (“EDP”) charges - HELD THAT:- We find that the expenditure being incurred in nature year after year, and cannot be placed in the category of capital expenditure - services are basic business operations of the company through the organised and maintained IT support systems. Further the sample copies of the invoices show that these services are charged on the basis of uses at a predefined hourly usage rates and these expenses are incurred for the services in the nature of operational IT services such as browsing charges, usage of Swarovski distribution system software for facilitating the activities such as customer invoicing, inventory management etc services of laptops and PCs etc which are helpful to the assessee to perform the basic business operations.
It is not the case of the Revenue that these expenses were made for purchase of any software for the purpose of making enhancement to any profit-making operations of the company constituting the capital asset. It could further be found from the record that no fixed amount expenses are incurred. As relying on M/S ASAHI INDIA SAFETY GLASS LTD. [2011 (11) TMI 2 - DELHI HIGH COURT] Software and Electronic Data Processing (“EDP”) charges incurred by the assessee are Revenue in nature and the assessee is entitled to claim the same as allowable deduction. We, therefore, delete the addition made on this account.
Nature of expenditure - Expenditure on media advertisements, PR agency fees, communication material and others - HELD THAT:- This Tribunal in assessee’s own case for the Assessment Year 2004-05 [2017 (2) TMI 691 - ITAT DELHI]held that the entire expenditure on publicity and advertisement is allowable fully in the year in which it is incurred and a similar view is adopted for the Assessment Year 2002-03, 2004-05 [2017 (2) TMI 1388 - ITAT DELHI] - Thus assessee had rightly claimed deduction of advertisement and publicity expenditure as Revenue expenditure.
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2019 (7) TMI 1764 - ITAT CHENNAI
Bogus LTCG - penny stock purchases - Eligibility of deduction under Section 10(38) - HELD THAT:- It is not brought on record how the assessee is involved in promoting the penny stock company and how the assessee involved in inflating the shares of the company. Moreover, the copy of the investigation report said to be received from the Investigation Wing of the Department at Kolkata was not furnished to the assessee. On identical circumstances, this Tribunal in the case of Kanhaiyalal & Sons (HUF) [2019 (2) TMI 1640 - ITAT CHENNAI] has remitted back the matter to the file of the Assessing Officer for reconsideration.
In view of the above, this Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the issue raised by the assessee with regard to deduction under Section 10(38) of the Act is remitted back to the file of the Assessing Officer - Appeal filed by the assessee is allowed for statistical purposes.
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2019 (7) TMI 1763 - ITAT MUMBAI
Income from house property - ALV of the vacant flat - municipal ratable value Adoption - HELD THAT:- In the case of Harsh Jain [2015 (7) TMI 1253 - ITAT MUMBAI] The coordinate bench has taken the similar view in which the municipal ratable value has taken into consideration for the deemed income from the house property. The said decision has also been upheld by Hon’ble Bombay High Court in the case of PCIT Vs. Harsh Jain [2019 (2) TMI 537 - BOMBAY HIGH COURT]
Therefore, in view of the said circumstances, we are of the view that the ALV of the vacant flat has to be determined on the basis of municipal ratable value for the purpose of assessing income under the house property. Accordingly, we decide this issue in favour of the assessee against the revenue.
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2019 (7) TMI 1762 - ITAT PUNE
Characterization of income - treatment of subsidy received by assessee - capital or revenue receipt - HELD THAT:- The scheme of State of Jharkhand, wherein State Policy for Mega Projects was announced vide Notification No.2371 i.e. Jharkhand Mega Project Incentive Rules, 2005. The said scheme was promulgated to boost industrial development in the State of Jharkhand for setting up new industrial units or industrial units undertaking expansion, diversification and modernization on or after 15.11.2000.
The purpose of above scheme was to establish new units in Jharkhand and hence purpose of scheme was in capital field i.e. to establish manufacturing unit in Jharkhand. Merely because the incentives were received in the form of sales tax waiver, would not change the purpose of grant of subsidy.
The assessee has also received subsidy under the Maharashtra PSI 2007 Scheme for Jejuri plant. In view thereof, where the purpose of subsidy was to establish units, was in capital field, hence the subsidy received is capital receipt. We accordingly, reject the grounds of appeal raised by Revenue.
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2019 (7) TMI 1760 - ITAT BANGALORE
TP Adjustment - determination of ALP was referred to by the AO, accepted TNMM as the MAM and also used the same PLI for comparison i.e., OP/TC - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected from final list.
Negative working capital adjustment - HELD THAT:- There is no need for making any negative working capital adjustment when assessee does not carry any working capital risk. In fact, TPO should have done necessary working capital adjustment to the profits of the selected comparables so as to make them comparable to the assessee. In view of this, we direct the TPO not to make negative working capital adjustment.
It is undisputed that the Assessee is also a captive service provider such as the Assessee in the case decided by the ITAT Hyderabad Bench and therefore making a negative working capital adjustment without appreciating the fact that the company does not bear any working capital risks, was not correct.
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2019 (7) TMI 1758 - ITAT DELHI
Assessment u/s 153A - denial of natural justice - Revenue Authorities have not provided the statement based on which addition is made and not providing opportunity of cross examination - HELD THAT:- Keeping in view of the assessment order passed by the AO, we have not seen from the proceedings of the AO regarding providing any statement of Sh. Pradeep Kumar Jindal to the assessee and providing opportunity of cross examination of Sh. Pradeep Kumar Jindal to the assessee meaning thereby the Revenue Authorities have not provided the statement of Sh. Pradeep Kumar Jindal to the assessee and also did not provide the opportunity of cross examination of Sh. Pradeep Kumar Jindal, on which basis the addition has been made and the provisions of Section 153A of the Act have been wrongly applied in the case of the assessee. Therefore, we do not find any cogency in the arguments advanced by the Ld. CIT(DR) and the case laws cited by him in support of his contention are not applicable here. - Decided in favour of assessee.
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2019 (7) TMI 1754 - BOMBAY HIGH COURT
Undisclosed payment - Addition based on seized material - assessee never provided the details of the transaction either during the course of assessment proceedings or thereafter and the assessee was in the exclusive knowledge - close business relationship between the assessee and PA - HELD THAT:- Tribunal has formed opinion that there was no payment of USD 16 Lacs which was added by the Assessment Officer to the income of the assessee. The Tribunal held that the said amount may be demanded by the assessee but there was no evidence of the same having been paid. The entire issue is thus based on appreciation of evidence on record. No question of law arises. In that view of the matter, Income-tax Appeal is dismissed.
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2019 (7) TMI 1753 - ITAT MUMBAI
Determination of rental income - Income from house property - AO treating two properties as deemed let out and determining on an adhoc basis notional rental income for both the properties - HELD THAT:- As submitted that a decision of ITAT in the case of co-owner Smt. Vidyaben Bhagwan Kotak [2017 (9) TMI 1917 - ITAT MUMBAI] in respect of the same flats in which she had half shareholding in Flat No. 16 & 18 at Kalpana, in which said order has accepted that these flats are duplex flats used by the assessee having common staircase and hence it was held that they can be considered as one house which is adjacent to each other.
We find that since there is an ITAT order in the case of co-owner, which has not been set aside by Hon'ble Hon'ble Jurisdictional High Court, we deem it appropriate to remit this issue to the file of the Assessing Officer. The Assessing Officer shall consider this additional evidence and decide accordingly. We further hold that there is no estoppel against the assessee in now offering self occupied property and deemed let out property in a different manner than that offered initially. Assessee is very much entitled to plan its taxation so as to minimize the burden so long as the method is not colourable. Here the approach of the assessee can by no stretch of imagination be said to be a colourable device.
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2019 (7) TMI 1751 - ITAT DELHI
Deduction u/s 80HHC - not to exclude the Sample Design and Development charges receipt amounting to ₹ 1352700/- for the calculation of deduction - assessee failed to file documentary evidence to justify its claim and as per provisions of explanation (baa) of section 80HHC, for computing “profits of business” 90% of sums referred to in clauses (iiia) to (iiie) of section 28 or any receipt by way of brokerage, commission, interest, rent, charges of any receipt of similar nature included in such profits have to be deducted from the profits and gains of business or profession - HELD THAT:- We find an identical issue had come up before the Tribunal in the assessee’s own case in the preceding assessment year. We find the Tribunal, in assessee’s own case [2017 (5) TMI 1639 - ITAT DELHI] held that the receipts on account of sample design and development charges are export turnover and represents the business income of the assessee and, thus, cannot be excluded from the receipt under Explanation (baa) of section 80HHC of the Act. In view of the consistent decision of the Tribunal, we hold that receipts on account of sample design and development charges are export turnover and represents the business income of the assessee and this cannot be excluded from the receipts under Explanation (baa) of section 80HHC.
DEPB receipts - CIT(A) directed the Assessing Officer to exclude the DEPB receipts for the calculation of deduction u/s 80HHC by accepting the contention of the assessee and without examining the actual profit component or loss. Since the computation along with evidence was not submitted by the assessee either before the Assessing Officer or before the CIT(A) and since no such details are available in the audited accounts of the assessee as in the P&L Account, there is only one entry i.e., receipt on account of DEPB, therefore, we agree with the argument of the ld. DR that this matter should be restored to the file of the Assessing Officer with a direction to examine the profit element in the sale of DEPB licence and to recompute the deduction u/s 80HHC in the light of the decision of the Hon'ble Supreme Court in the case of Topman Exports [2012 (2) TMI 100 - SUPREME COURT]. The Assessing Officer shall decide the issue as per fact and law.
Interest income on fixed deposits for the computation of deduction u/s 80HHC - The assessee fairly conceded that this issue has been decided against the assessee by the Hon'ble High Court in the case of Ram Honda Power Equipment [2007 (1) TMI 86 - HIGH COURT, DELHI]. In view of the above submission of the ld. counsel for the assessee, this issue is decided against the assessee.
Denial of deduction being contribution to Group Gratuity Policy of LIC of India - HELD THAT:- We find an identical issue had come up before the Visakhapatnam Bench of the Tribunal in the case of District Cooperative Central Bank vs. ITO [2018 (4) TMI 553 - ITAT VISAKHAPATNAM]. We find the Tribunal relying on various decisions held that the assessee is entitled for deduction for payment of group gratuity to LIC of India towards group gratuity scheme - Thus we hold the assessee is entitled to the deduction for contribution to Group Gratuity Policy of LIC of India.
Addition on account of ALP of the international transaction - royalty payment on various services - TPO disallowed the royalty paid by the assessee to its AE on the ground that the assessee is a contract manufacturer of its AE and is not deriving any benefit from payment of royalty and, therefore, he should not have paid any royalty - HELD THAT:- A perusal of the royalty agreement w.e.f. 1st April, 2003 shows that the terms and conditions of the agreement are same as that of royalty agreement applicable during assessment years 2002-03 and 2003-04. The agreement effective as on 01.04.2001 as applicable during assessment years 2002-03 and 2003-04 was a single agreement which dealt with both technical know-how and assistance and trade mark whereas in the current year the assessee had split the royalty agreement into two separate agreements i.e., technical know-how and assistance agreement and use of trade mark made under the label of corporate agreement.
We find the Tribunal in assessee’s own case for assessment year 2003-04. [2017 (5) TMI 1639 - ITAT DELHI] held royalty expenditure by the assessee was fully and exclusively incurred in the regular course of business and after incurring this expenditure the assessee declared profit @19% which was better than the GP rate of 12 & 16% declared by the comparables. Therefore, it was at arm’s length and the addition made by the AO was not justified which has rightly been deleted by the ld. CIT(A). We, therefore, considering the totality of the facts, do not see any valid ground to interfere with the findings given by the ld. CIT(A).
We further find some force in the argument of the ld. counsel for the assessee that the transaction is revenue neutral as the royalty expenses are embedded in the sale price from the AEs to whom goods are sold and pays to other AE i.e., PRC, USA. The price to be charged to buyer is determined on the basis of cost plus mark up. Further, the assessee is consciously recovering royalty from AEs by including it in the price quoted to the buyer and royalty is also part of cost of production and, therefore, arm’s length nature of expenses is established while benchmarking the international transaction of export of sales. We also find force in the argument of the ld. counsel for the assessee that the agreements with PRC, USA are for providing technical know-how and allowing use of trade names and trade marks by PRC, USA to the assessee and not a contract manufacturing agreement and, therefore, the action of the TPO in re-writing the agreement is not permissible in law. Further, for the purpose of computing the ALP on export garments, the assessee has compared itself with companies which are full-fledged risk bearing manufacturers, a comparison which has been accepted by the TPO.
TPO has himself acknowledged that for the purpose of manufacture and export of garments, the assessee is a full-fledged manufacturer and not a contract manufacturer. The TPO has also accepted the functional, assets and risk profile of the assessee given in the TP documentation which is that of full-fledged risk bearing manufacturer - We further find the assessee during the impugned assessment year has exported to non-AEs as well as AEs and, therefore, it is factually incorrect on the part of the TPO that the sale of the entire finished product is to the AE.
In view of the above discussion and considering the fact that the Tribunal in assessee’s own case in the immediately preceding assessment year has deleted the adjustment made by the A.O./TPO on account of payment of royalty, therefore, we uphold the order of the CIT(A) on this issue and the ground raised by the Revenue on this issue is dismissed.
Depreciation @ 60% on computer accessories and peripherals, namely, UPS and printers - HELD THAT:- We find the issue relating to depreciation on computer peripherals, namely, printers and UPS at 60% stands decided in favour of the assessee by the coordinate Benches of the Tribunal where it is being consistently held that printers and UPSs are integral part of the computer system and are entitled to depreciation @ 60%. We, therefore, uphold the order of the CIT(A) in allowing depreciation @ 60% on computer peripherals and reverse the order of the CIT(A) in allowing 25% depreciation on UPSs as against 60% claimed by the assessee. Thus, the ground raised by the Revenue on this issue is dismissed and the additional ground raised by the assessee in Cross Objections is allowed.
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2019 (7) TMI 1750 - AUTHORITY FOR ADVANCE RULINGS, (NCR BENCH) NEW DELHI
Advance ruling - Fees for technical services or business income taxable in India - Payment receivable for various services in terms of the services agreement - chargeable to tax under the Act read with India-UK DTAA? - interpreting the term ‘make available’ - Services rendered are included in the "fees for technical services" (FTS) or not? - rendering the services as per agreement did not make available the technical knowledge and the experience possessed by it - HELD THAT:- The nature of services rendered in this case were 'corporate head office services'; 'divisional global services'; and 'divisional regional services' which related to financial, executive, marketing and administrative matters. In view of the decision as given in this case, this does not support the cause of the revenue.
When we examine the facts of the present case on the above yardstick of ‘make available’ as decided in the case of Intertek [2008 (11) TMI 9 - AUTHORITY FOR ADVANCE RULINGS], it is found that the nature of services in this case are such that the technical knowledge, skills, etc., was not passed on and did not remain with the recipient of the service.
Nature of services rendered in this case is found to be identical with the services rendered in the case of Ernst & Young (P). Ltd. [2010 (3) TMI 108 - AUTHORITY FOR ADVANCE RULINGS], relied upon by the Applicant. Applicant while rendering the services as per agreement did not make available the technical knowledge and the experience possessed by it.
Thus we hold that the consideration paid for services rendered by the applicant is not covered by fee for technical services in terms of Article 13.4 of Indo-UK Tax Td.
Ruling:-
Ques.1 The payment receivable by the Applicant from DTZ International Property Advisers Private Limited (hereinafter referred to as “DTZ India”) for various services in terms of the services agreement dated 17th February 2011 is not in the nature of “Fee for Technical Services” under Article-13.4 of India-UK Tax Treaty as the services rendered by the non-resident company do not meet the requirement of ‘make available’ under the Treaty. The payment will also not be treated as business income taxable in India in terms of India-UK Tax Treaty as the non-resident company does not have any PE in India.
Que.2 As the answer to question No.1 is in negative, DTZ India is not liable to deduct tax at source under section 195 of the Act on the amount payable to DTZ UK in terms of the services agreement dated 17th February 2011.
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2019 (7) TMI 1746 - ITAT HYDERABAD
Rectification of mistake - HELD THAT:- The order is rectified as under:
“At para 8 of the order at the third, the AY should be read as 2010-11 instead of AY 2009-10.”
Para 10 of the order is replaced as under:
“We notice that AY 2011-12 was pending assessment u/s 143(3) and, therefore, it is abated. With regard to AY 2010-11, it was reopened u/s 153A and this issue was raised for the first time before the AO. With regard to AY 2012-13, 2013-14, 2014-15 and 2015-16, returns of income for these AYs were filed subsequent to search conducted on 22/02/2012. Since facts in these AYs are similar to AY 2010-11, following the decision in AY 2010-11 (supra), we dismiss all the appeals filed by the revenue for the AYs under consideration.”
MAs filed by the assessee are allowed.
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2019 (7) TMI 1743 - ITAT AHMEDABAD
Addition on account of motor accident claims of earlier years - HELD THAT:- As decided in own case [2018 (1) TMI 1622 - ITAT AHMEDABAD] merely because the MACT awards are booked by the assessee at a later point of time than the date of the award cannot be reason enough to decline the claim for deduction in respect of these awards. It is sometimes possible, rather its inherent mechanism of the system as it exists, that sometimes there is considerable delay in communicating the awards granted by MACT - quantification of claims is verified by the statutory auditors as also the CAG audit teams, and the same method of accounted is being followed by the assessee for last 50 years. As there is no change in method of accounting, as there is no duplication of claims, and, as assessee does not anyway gain anything from delaying accounting for these claims, we see no reasons to reject the claims merely because these claims are accounting for, in the books of accounts, at a point of time later than awards being granted i.e. when the assessee gets to know about the same.CIT(A) has given a categorical direction to the Assessing Officer for verification of claim on account of the liability having been crystallized in the relevant previous year. Grievance of the Assessing Officer, regarding crystallization of liability, does not, therefore, survive any longer. - Decided against revenue.
Addition on account of capitalization of reconditioning of Buses & assemblies etc. - HELD THAT:- The issue is squarely covered in favour of the assessee by and under an order dated 24.01.2013 passed by the Co-ordinate bench [2013 (1) TMI 758 - ITAT AHMEDABAD] in assessee’s own case for A.Y. 2005-06 in appeal preferred by the Revenue. We have carefully considered the order passed by the Co-ordinate Bench as mentioned hereinabove. We find that identical issue has been decided in favour of the assessee
Income from license fees of canteen - as business income OR income from house property - HELD THAT:- As decided in own case [2018 (1) TMI 1622 - ITAT AHMEDABAD]Admittedly, the major part of the income for the licence fee of canteen not from staff, but from outsiders and hence judgment is not applicable to this receipt at all, and even for the receipt of rent on account of staff quarter, the judgment is not applicable because it could not be shown by the learned AR of the assessee that the facts are identical. Regarding the argument that this income was taxed under the head income from business in earlier years, we find that on the plea of consistency, it cannot be held that if a mistake is committed by the AO in earlier years, the same should be perpetuated. This is not case of the assessee that the rental income is not in respect of house property owned by the assessee, and hence in our considered opinion, this rental income is taxable under the head income from house property, as has been held by the authorities below, and hence, we do not find any reason to interfere with order of the learned CIT(A) on this issue, and this ground of the appeal of the assessee is dismissed.
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2019 (7) TMI 1740 - MADRAS HIGH COURT
Accrual of income - Addition being interest accrued on non-performing assets, even though the assessee is following a mercantile system of accounting - Whether the assessee is entitled to follow a hybrid system of accounting by showing the interest on non-performing assets only on receipt basis, while otherwise following a mercantile system of accounting contrary to the provisions of Section 145 of the Income Tax Act? - HELD THAT:- Following the ratio laid down by the Hon'ble Supreme Court in Vasisth Chay Vyapar Ltd. [2018 (3) TMI 56 - SUPREME COURT] substantial questions of law are decided in favour of the appellant – assessee.
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2019 (7) TMI 1738 - ITAT DELHI
Nature of expenditure - expenditure as license fee payment to M/s. Remfry and Sagar Consultants Pvt. Ltd. (RSCPL) for use of goodwill of ‘Remfry & Sagar’ and to practice in this name - revenue or capital expenditure - HELD THAT:- We find that this issue is permeating from the earlier years and the Tribunal after noting the entire facts and rival contentions made by the parties as well as relevant provision of law has held that the license fee paid to M/s. RSCPL is allowable as Revenue expenditure - thus we hold that the said deduction claimed by the assesse on account of license fee paid to M/s. RSCPL is allowable as Revenue expenditure u/s.37. Consequently, ground no.1 of the Revenue is dismissed.
Disallowance on account of TDS payable - case of the AO was that this was a part of expenditure and has been claimed as expenditure in P&L account and since assessee is following cash system of accounting, therefore, same cannot be allowed as it remain payable on 31st March, 2011 - HELD THAT:- Before us, learned counsel has submitted the details of challan of TDS deposited on 24.07.2011 and if the TDS deducted has been deposited within due date prescribed under the rules then credit of the same has to be allowed. Thus, this issue is decided in favour of the assessee.
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2019 (7) TMI 1735 - ITAT MUMBAI
Reopening of assessment u/s 147 - addition made u/s 56(2)(viib) - HELD THAT:- gone through the original assessment order and the details filed before the AO during the course of original assessment proceedings and noted that the assessee vide letter dated 17.12.2011 has filed complete details of share premium account and also the valuation report of the assessee company valuing the share premium at ₹ 6400/- per share
The original assessment was passed under section 143(3) of the Act after perusal of the documents as required by the AO with respect to issue of share subscription money received after proper application of mind. We noted that the AO had called for assessee’s explanation on issue, which is in his opinion needed consideration and only after verification of details passed the original assessment order.
Once an assessment is completed under section 143(3) of the Act after raising a query on a particular issue and accepting assessee’s reply to the query, the AO had no jurisdiction to reopen the assessment unless and until there is additional information/tangible material before the AO to come to the conclusion that there is an escapement of income.
This issue has been dealt in by Hon’ble Bombay High Court in the case of Godrej Agrovet Ltd [2010 (2) TMI 27 - BOMBAY HIGH COURT] wherein it is held that the Assessing Officer cannot act in excess of the restrains on his jurisdiction to reopen an assessment in exercise of the powers under section 147 read with section 148 - Decided in favour of assessee.
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