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Income Tax - Case Laws
Showing 41 to 60 of 806 Records
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2021 (9) TMI 1470 - ITAT DELHI
Denial of natural justice - CIT-A did not afford reasonable opportunity on the innocuous appellant to furnish documentary evidence and other details as desired necessary by him - HELD THAT:- A perusal of the record shows that there is nothing on record to show that any such opportunity was granted by the CIT(A) . It is well settled that in case an adjudicating authority finds the written submissions are not sufficient and complete then necessarily the First Appellate Authority should put this deficiency to the notice of the appellant. Without any specific communication to this effect, it cannot be said in all fairness that an effective opportunity of being heard has been granted to the assessee. Once it is seen that the submissions were without supporting documentary evidences then in an effective representation such an opportunity necessarily needs to be provided. No such effort appears to have been done.
Thus it of the view that since there is nothing available on record to show that the right to be heard was waived off by the assessee, let alone consciously waived off a fair opportunity of being heard effectively has not been made available - in the interests of substantial justice it is deemed appropriate to set aside the impugned order directing the assessee to place full facts, evidence alongwith supporting claims before the First Appellate Authority. It is made clear that the Ld. CIT(A) shall entertain the fresh evidences and pass an order in accordance the law - Appeal of the assessee is allowed for statistical purposes.
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2021 (9) TMI 1467 - ITAT BANGALORE
TP Adjustment - MAM selection - rejection of Comparable Uncontrolled Price (CUP) method adopted by the assessee Price and wrongly adopting Transaction Net Margin Method (TNMM) disregarding prices quoted by London Metal Exchange ("LME") which is a global benchmark for commodity pricing - HELD THAT:- As seen from the details of international transactions, the assessee is importing raw material from its AE and also making exports of products to the customers in accordance with the Purchase Order which is carried out by Wieland group. Thus, import as well as export transactions are interlinked and closely linked. The price of export is not free from the impact of the import price. Therefore, the international transactions in respect of import of raw material has direct bearing on export of goods.
TPO has applied TNMM by taking entire turnover of the assessee and then proposed an adjustment being the difference between the net margin of assessee as well as comparable price. Since these international transactions are closely linked and rather inter-dependent having a bearing on each other, therefore, for the purpose of determining the ALP it is appropriate to take composite transaction and apply TNMM as the most appropriate method. CUP is no doubt a preferable method of determining ALP as it leaves no scope of any possible variations in the process of computing ALP.
When transactions are relatable and interrelated, then if a particular transaction out of the composite transactions cannot be tested under CUP method, then it is not proper to apply separate methods for determining the ALP for each of the transaction, particularly when international transactions are closely linked and inter-depending having direct bearing on the price of each other. Therefore, we are of the considered opinion that in the given facts and circumstances of the case, the TNMM would be the most appropriate method for determining the ALP of international transactions entered into by the assessee with AE. We do not find any infirmity in the order of the DRP on this issue and the same is confirmed.
TPO not considered the underutilization of manufacturing capacities and the resulting idle costs while computing the assessee’s margins - AR submitted that assessee’s request for adjustment of capacity utilization while computing operating margins under TNMM has not been considered by the revenue authorities - HELD THAT:- The assessee has not furnished sufficient data pertaining to capacity utilisation of comparable companies so as to determine the material difference existing between the assessee and comparable. Hence, we remit this issue to the file of TPO with a direction to the assessee to furnish necessary data pertaining to capacity utilisation of comparable companies and for fresh adjudication of the issue by the TPO.
Selection of comparables by the TPO and application of filters - Manufacturing activities filter / Functional similarity filter - HELD THAT:- It is not necessary for the comparable company and the taxpayer to cater to the same industries in order to be functionally comparable. TNMM does not require strict product comparability such as the difference in thickness of the copper and copper alloy products produced.The import filter objection has been dealt with in detail.
Application of Foreign currency expenditure filter / Imports filter - HELD THAT:- It is noted that the consumption of raw materials is there in all of the comparable companies. The TPO has narrowed down to industries engaged in copper and its alloys. If copper and alloys are available in foreign markets much cheaper than the local markets, the comparables must have imported the raw materials from abroad. If the raw materials were much cheaper in India, the prudent assessee must have procured them locally instead of importing them. Hence, it goes to show that the cost of raw materials was not a differentiating factors whether one industry imports or not. Functional issues of each comparable are important here. The DRP compared each of the five companies with details and finally concurred with the findings of the TPO. Being so, we find no infirmity in the same and accordingly uphold the order of DRP.
Disallowance of IT Support and Maintenance charges as prior period expenses - AO disallowed the claim of expenditure relating to the earlier years - HELD THAT:- From the details furnished by the assessee, it is observed that all these expenses are from the related group concerns and assessee has not produced any evidence to show that these expenses actually crystallized during the current year, except invoices from its AE. No evidence for negotiations or finalization of terms is produced. We don't find any such negotiations are required for the sharing of expenditure as much of the expenses are in the nature of Information Technology services made available to the assessee in India. Apparently, no TDS was effected. There is no dispute that these expenses are related to earlier period and there is no substantiation that these are crystallised during the current AY except for the raising of invoices by the AE which is within the ambit of the assessee. Accordingly, the expenditure is not relatable to this year, as the same is crystallized this year. Hence we confirm the directions of the DRP.
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2021 (9) TMI 1466 - ITAT LUCKNOW
Reopening of assessment u/s 147 - reason to believe on the basis of AIR information - Cash Deposits of the appellant bank accounts - addition was made on the basis of G.P. ratio - HELD THAT:- Addition has been made on the basis of net profit ratio to the turnover. The Hon'ble Bombay High Court in the case of Black & Veatch Prichard Inc. [2016 (4) TMI 1365 - BOMBAY HIGH COURT] following the judgment of Jet Airways [2010 (4) TMI 431 - HIGH COURT OF BOMBAY] has decided the issue against the Revenue wherein held as agreeable with the submissions which has been urged on behalf of the assessee that s. 147(1) as it stands postulates that upon the formation of a reason to believe that income chargeable to tax has escaped assessment for any assessment year, the AO may assess or reassess such income "and also" any other income chargeable to tax which comes to his notice subsequently during the proceedings as having escaped assessment. The words "and also" are used in a cumulative and conjunctive sense. To read these words as being in the alternative would be to rewrite the language used by Parliament. Our view has been supported by the background which led to the insertion of Expln. 3 to s. 147. Parliament must be regarded as being aware of the interpretation that was placed on the words "and also" by the Rajasthan High Court in Shri Ram Singh [2008 (5) TMI 200 - RAJASTHAN HIGH COURT] Parliament has not taken away the basis of that decision. While it is open to Parliament, having regard to the plenitude of its legislative powers to do so, the provisions of s. 147(1) as they stood after the amendment of 1st April, 1989 continue to hold the field.
However, Hon'ble Supreme Court has admitted the SLP filed by the Revenue. However, mere admission of SLP by the Hon'ble Supreme Court will not amount to overruling of its earlier judgment in the case of Jet Airways(Supra).Ground No.1 of the appeal of assesseeis allowed
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2021 (9) TMI 1465 - ITAT DELHI
TP adjustment in respect of royalty and commission - HELD THAT:- It is also not in dispute that the commission sales by the assessee constitutes only about 0.42% of the total revenue of the assessee whereas 99.58% of income is from trading of chemicals, as pleaded by the assessee - TPO compared the rate of commission charged by the assessee to one AE with the rate of commission charged by the assessee to other AEs. Such an exercise is not permissible under the provisions of section 92F(ii) read with section 92 of the Act, as has been held by the co-ordinate Bench in the case of assessee for the assessment year 2013-14 since the TPO was supposed to compare the controlled transaction with other uncontrolled transactions.
We are of the considered opinion that the orders of the authorities below do not stand the test of judicial scrutiny in so far as the adjustment on the aspect of royalty and commission are concerned and since there is no change in the facts and circumstances of the case from the assessment year 2013-14, while respectfully following the findings of the Tribunal in the order [2018 (5) TMI 946 - ITAT DELHI] we hold that the adjustment in respect of royalty and commission cannot be sustained and the same shall be deleted.
Interest on receivables - AO was of the opinion that any delay beyond the credit period shall be bench marked as an international transaction and by applying the same - AO calculated the interest chargeable on receivables by taking the credit period as 30 days and TPO suggested adjustment - HELD THAT:- It is not the case of the Revenue that even in respect of non-AEs also, the assessee is charging any interest. It is the policy of the assessee, as submitted that the assessee does not charge interest either from AEs or non-AEs and accordingly does not pay interest from AEs. Assessee demonstrated that as on 31.03.2016, a sum was receivable from AEs whereas the sum was payable by the assessee, resulting in net payable as per their books. There is nothing contrary to this averment made by the assessee with reference to the books. In Kusum Health Care Pvt. Ltd. [2017 (4) TMI 1254 - DELHI HIGH COURT]
We are of the considered opinion that the authorities below are not justified in making adjustment on account of interest receivable and therefore, impugned adjustment on account of interest receivable is directed to be deleted. Consequently, the appeal of the assessee deserves to be allowed.
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2021 (9) TMI 1464 - ITAT MUMBAI
Disallowance u/s 14A - Necessity to record satisfaction - HELD THAT:- Although, the CIT(A) had observed that the possibility of use of services of staff, office and establishment relating to the proprietary business of the assessee for making investments in shares and mutual funds could not be ruled out, however, we find, that he too had failed to record his satisfaction that having regards to the accounts of the assessee, it was not possible to accept the correctness of the assessee‘s claim that no disallowance of any expenditure was called for u/s 14A.
Assessee had maintained separate books of accounts for his activity of making investments in shares and mutual funds. Accordingly, in case the A.O; or the CIT(A) in exercise of his powers which are coterminous with that of an A.O, sought to disallow the claim of the assessee that no expenses could be attributed to earning of the exempt dividend income by him, then, there was an innate obligation cast upon them to have recorded the requisite satisfaction that having regard to the accounts of the assessee, as placed before them, it was not possible to generate the requisite satisfaction with regards to the correctness of the aforesaid claim of the assessee. We are afraid that as there is a clear lapse on the part of the lower authorities in validly assuming jurisdiction for dislodging the assessee‘s claim that no disallowance u/s 14A was called for in his hands, therefore, the disallowance worked out by the A.O u/s 14A r.w. Rule 8D(2)(iii) which thereafter had been sustained by the CIT(A) cannot be upheld and is liable to be vacated. The Ground of appeal no.1 is allowed in terms of our aforesaid observations.
Claim of ‘education cess‘ on the tax payable by him should have been allowed while computing his income for the year under consideration - HELD THAT:- Claim of the Ld. A.R that unlike “rates” and “taxes” the amount paid by an assessee towards “Education Cess” or any “other cess” viz. the Secondary and Higher Education Cess is not a disallowable expenditure u/s 40(a)(ii) we find that the said issue is squarely covered by the recent order of the Hon‘ble High Court of Bombay in the case of Sesa Goa Limited [2020 (3) TMI 347 - BOMBAY HIGH COURT] therein conclude that “Education Cess” and the Secondary and Higher Education Cess is not disallowable as a deduction u/s 40(a)(ii) of the Act. Accordingly, we herein restore the issue to the file of the A.O with a direction to give consequential effect to our aforesaid observations. The additional ground of appeal raised by the assessee is allowed in terms of our aforesaid observations.
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2021 (9) TMI 1463 - ITAT DELHI
TP adjustment to back office support service segment - Comparable selection - TPO made adjustment to transaction of merchanting trade of Agri-comodities and provision of back office support services - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected.
Addition of outstanding receivable - Classifying the international transaction of merchandising trade as a finance arrangement - assessee has alternatively requested to take interest rate of 2.74%, which the assessee had used to pay interest on advance received from associated enterprises - As per DR assessee has paid money out of Indian rupees and, therefore, suffered loss on interest in Indian Rupees and, thus, learned TPO justified in holding the arrangement as financial arrangement and benchmarking invoking the SBI prime lending rate +300 basis point - HELD THAT:- Since the payment from ‘LD Asia’ was received after a delay of 65 days, it is in international transaction in the nature of outstanding receivable simpliciter without any allegation of arrangement of colluded finance transaction. TPO has though alleged it as financial arrangement to benefit AE, but benchmarked it is outstanding receivable. But in both ways, the currency of transaction is US Dollar. In first way, it is US Dollar have been sent to AE; in second way, US Dollar was outstanding to be received for 65 days. Neither the loan has been given in Rupees, nor outstanding was to be received in Rupees.
Benchmarking of the transaction we agree with the learned Counsel of the assessee that in view of transaction of sale in US dollar, adjustment for interest should be benchmarked on the basis of currency of transaction following the decision of Cotton Naturals (I) P Ltd [2015 (3) TMI 1031 - DELHI HIGH COURT] accordingly the Learned TPO is directed to recompute the adjustment. The ground No. 4 of the appeal is dismissed, however, the alternative ground 4.1 is allowed for the statistical purposes.
Disallowance u/s 14A - Whether addition should be made on average investment and not on turnover? - HELD THAT:- During the year under consideration, assessee has made purchase and sale of mutual funds of huge amounts and, therefore, incurring of expenditure for earning exempt income cannot be denied in terms of section 14A of the Act. However, if Rule 8D of the Rules is invoked, there would not be any disallowance in view of no opening and closing stock value of mutual funds. In the circumstances, we accept the alternative claim of the assessee to restrict the disallowance to the extent of exempted income following the decision of Joint Investment Private Limited [2015 (3) TMI 155 - DELHI HIGH COURT] and accordingly direct to restrict the disallowance to the amount of ₹ 94,929/-. The ground of the appeal of the Revenue is accordingly allowed partly.
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2021 (9) TMI 1462 - ITAT DELHI
Disallowance of expenses as no business activity was carried out by the assessee during the year under consideration - difference between commencement of the business and setting off of the business - HELD THAT:- The project cost in relation to a project comprises of cost of land and cost of development rights, borrowing cost, construction and development cost. In relation to land, the entire cost of land and development rights, stamp duty registration charges and other incidental expenses have to be capitalized. With relation to the borrowing cost, the interest directly related to the project is to be capitalized.
All the direct costs relating to the construction and development of the specific project have to be capitalized. The construction cost includes conversion cost, municipal sanction fee, expenses incurred, site labour cost, cost of material, cost of hiring plant & machinery, cost of designs and claims of the third party. The general administrative cost, advertisement, brokerage, selling cost, depreciation of the vehicles and office expenditure are part of the revenue expenditure and need not be capitalized.
There is difference between commencement of the business and setting off of the business. All the expenses incurred pre-commencement are to be treated as pre-operative expenses and the expenses incurred which do not form the part of the “work in progress” (WIP) like office expenses, salaries, advertising, travelling expenses which are incurred for running of the business operations are to be treated as revenue expenditure. Hence, the disallowance made by the AO is liable to be obliterated. Appeal of the assessee is allowed.
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2021 (9) TMI 1461 - BOMBAY HIGH COURT
Validity of assessment order passed as prejudicial to petitioner - respondent no.3 has noted that a show cause notice alongwith draft assessment order was issued on 21st April 2021 but petitioner failed to provide any documentary evidence or even respond to the said show cause notice - HELD THAT:- At Exhibit “L” to the petition is a copy of the reply to the show cause notice. In the said exhibit, a print out of the e-proceedings response acknowledgment from the Income Tax Department is also annexed which confirms that the reply to show cause notice alongwith various annexures have been submitted on 27th April 2021. Therefore, respondent no.3 has erred in stating that petitioner did not even respond to the show cause notice. It is, therefore, also obvious that respondent no.3 has not considered the reply filed by petitioner before passing the assessment order.
In the circumstances, the assessment order dated 29th April 2021 impugned in this petition is quashed and set aside. Consequently, the demand notice dated 29th April 2021 u/s 156 of the Income Tax Act, 1961 is also quashed and set aside. The question of issuance of any other consequential notice will not arise.
The matter is remanded for de novo consideration. The concerned authority may pass such order as he may deem fit in accordance with law. We will hasten to add, we have not made any observations on the merits of the case.
We have to note that in the affidavit in reply filed by one Manoj Kumar, Income Tax Officer, Mumbai and affirmed on 12th August 2021, there is no denial of the fact that reply has been filed to the show cause notice. According to affiant, the Income Tax Business Application (ITBA) does not show any response of assessee to the notice. The least we would have expected the Officer, who has affirmed the affidavit, is to diligently go through the portals of the Income Tax Authorities particularly, when petitioner has annexed to the petition the e-proceedings response acknowledgment and not file a wishy washy reply.
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2021 (9) TMI 1460 - ITAT BANGALORE
DRP power to condone the delay in filing objections by the assessee before the Panel - AR admitted that there was a delay in filing the objections before the DRP by 3 days (the assessee has to file objections before the DRP u/s 144C(2)(b) within 30 days from the date of receipt of draft assessment order) - HELD THAT:- DRP derives its authorities and powers from the provisions of section 144C and its procedures are governed by Income Tax (Dispute Resolution Panel) Rules, 2009. The provisions of the Act or Rule do not give power to the DRP to condone any delay in filing the objections by the assessee before the Panel. If the Legislature had intended to give such powers, it had been expressly implied as in the case of powers with the CIT(A) u/s 249(3) of the I.T.Act and ITAT u/s 253(5) of the I.T.Act. Therefore, we are of the view that the DRP does not have powers to condone the delay of filing objections by the assessee before the Panel. See INNO ESTATES PRIVATE LIMITED [2018 (9) TMI 222 - MADRAS HIGH COURT] - we hold that the DRP has no power to condone the delay in filing objections by the assessee before the Panel.
ITAT power to hold that the assessment order is barred by limitation - In this case, the final assessment order dated 30.09.2016 was not pursuant to the direction of DRP. Therefore, the correct course open for the assessee would have been to file an appeal before the CIT(A) and pursue the said issue. The Hon’ble Madras High Court in the case of Inno Estates (P.) Ltd [2018 (9) TMI 222 - MADRAS HIGH COURT] had also decided the above issue indirectly. In the case considered by the Hon’ble High Court, the Advocate for the assessee submitted that the appeal would lie to the ITAT u/s 253(1)(d) of the I.T.Act and not before the CIT(A) u/s 246(1)(a) of the I.T.Act. This contention of the Advocate was rejected by the Hon’ble Madras High Court. The Hon’ble Madras High Court directed the assessee to file an appeal to the CIT(A) instead of ITAT
The plea of the assessee that the assessment order is barred by limitation, is not entertained on account of the reason that ITAT does not have jurisdiction for the same. Tribunal in the case of Yokogawa India Ltd. [2021 (4) TMI 151 - ITAT BANGALORE] relied by the assessee will not have application, since the ITAT has not considered the judgment of Hon’ble Madras High Court, cited supra. As regards the DR’s reliance on the ITAT order in the case of Himalaya Drug Co. v. DCIT (supra), we are not taking note of the same, since we have no jurisdiction to consider the plea of limitation on facts of this case. It is ordered accordingly.
Appeal filed by the assessee is dismissed.
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2021 (9) TMI 1457 - SC ORDER
Validity of the retrospective amendment to Section 143(1A) - whether the retrospective effect given to the amendment would be arbitrary and unreasonable inasmuch as the provision, being a penal provision, would operate harshly on assessees who have made a loss instead of a profit, the difference between the loss showed in the return filed by the assessee and the loss assessed to income tax having to bear an additional income tax at the rate of 20%? -
HELD THAT:- It is common ground raised in M/S. SATI OIL UDYOG LTD. & ANOTHER [2015 (3) TMI 854 - SUPREME COURT] as held that the issue raised in this appeal is squarely answered by this Cour Section 143 (1A) can only be invoked where it is found on facts that the lesser amount stated in the return filed by the assessee is a result of an attempt to evade tax lawfully payable by the assessee. The burden of proving that the assessee has so attempted to evade tax is on the revenue which may be discharged by the revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has, in fact, attempted to evade tax lawfully payable by it. Subject to the aforesaid construction of Section 143 (1A), we uphold the retrospective clarificatory amendment of the said Section and allow the appeals.
As the fact situation is similar, it is urged that this appeal may be disposed of on the same terms.
Consequently, we hold that the additional tax levied on the appellant cannot be lawfully recovered. Hence, the demand raised by the Department is set aside.
Accordingly, this appeal is allowed.
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2021 (9) TMI 1456 - ITAT HYDERABAD
Reopening of assessment u/s 147 - Reason to believe - Change of opinion - HELD THAT:- We are in Assessment Year 2010-11 wherein the AO had framed his section 143(3) regular assessment followed by recording of the foregoing reasons culminating in issuance of section 148. This impugned reopening therefore has been initiated beyond the specified period of four years from the end of the relevant assessment year in light of section 147(1) 1st proviso.
The said proviso stipulates that such a reopening would only be initiated if it is found that the assessee had not disclosed all the relevant particulars “fully” and “truly” before the AO in the first round.
CIT DR to dispute that the AO’s sole reopening reason has placed reliance on the assessee's books only regarding “reversal on account of cancellation and price revision”.
We therefore quote hon’ble Bombay high court’s landmark decision in Hindustan Lever Limited Vs. R.B. Wadekar[2004 (2) TMI 41 - BOMBAY HIGH COURT] that an AO’s reopening reasons have to be read on standalone basis; as it is, without any scope of further improvement at a latter stage by way of addition, deletion or substitution therein. We thus quote that to conclude that the impugned reopening has been rightly quashed by the CIT(A) as a mere change of opinion only. Revenue’s appeal is dismissed.
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2021 (9) TMI 1452 - SC ORDER
Deduction u/s 80IA on Internet services and internet telephone - reconstitution - change in shareholding - Revenue argued business was formed by splitting up and reconstruction of business already in existence or by transfer of old Plant & Machinery - Pattern of shareholding - Once the assessee is able to show that it has used new plants and machinery which has not been previously used for any purpose and the new undertaking is not formed by splitting up or reconstruction of business already in existence - HELD THAT:- We see no reason to interfere with the impugned judgment and order passed by the High Court. The Special Leave Petition is dismissed.
Pending applications shall stand disposed of.
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2021 (9) TMI 1450 - KERALA HIGH COURT
Assessment u/s 144B - Deduction u/s 80P - violation of the principles of natural justice - Petitioner is a primary agricultural credit co-operative society registered under the Kerala Co-operative Societies Act 1967 - HELD THAT:- As per the decision in Mavilayi Service Co-operative Bank and Others v. Commissioner of Income Tax, Calicut and Others [2021 (1) TMI 488 - SUPREME COURT] the income tax authority cannot go behind the classification accorded to the society under the Cooperative Societies Act and merely because the word ‘bank’ is included in the name of the society, the same would not be sufficient to deprive a primary agricultural credit society of the benefits of deduction u/s 80P of the Act.
Contrary to the findings in the assessment order mentioned earlier, it is seen from Ext. P4 acknowledgement from the Income tax department itself that the Department received petitioner’s reply along with relevant case law as a response on 28-07-2021. Thus there is merit in the petitioner’s contention that the impugned order is bad on account of violation of the principles of natural justice.
It is relevant to refer to the Division Bench Judgment of this Court in Poonjar Service Cooperative Bank Ltd. v. Income Tax Officer [2021 (6) TMI 1084 - KERALA HIGH COURT]. In the afore cited judgment, the learned single Judge had refused to interfere with an order of assessment and relegated the assessee to the remedy of a statutory appeal. However in appeal, noticing that the assessing officer had failed to apply the law laid down by the Supreme Court in Mavilayi’s Case [2021 (1) TMI 488 - SUPREME COURT] the Division Bench set aside the order of the learned single Judge and quashed the assessment order and directed the assessing authority to redo the assessment. The assessment order is liable to be set aside on the aforesaid reason also since the assessing officer had clearly failed to apply the dictum laid down Mavilayi’s Case.
Ext.P5 order of assessment for the year 2018-19 is quashed and the first respondent is directed to re-do the assessment of the petitioner society for the said assessment year afresh after issuing notice to the petitioner and after affording him an opportunity of being heard.
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2021 (9) TMI 1448 - ITAT BANGALORE
TP Adjustment - Comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee into business of software development, technical services and other related services need to deselected as comparable.
Working capital adjustment - A reading of Rule 10B(1)(e)(iii) of the Rules read with sec. 92CA of the Act, would clearly shows that the net profit margin arising in comparable uncontrolled transactions has to be adjusted to take into account the differences, if any, between the international transaction and the comparable uncontrolled transactions, which could materially affect the amount of net profit margin in the open market.
Chapters I and III of OECD Transfer Pricing Guidelines contain guidelines on comparability analyses for transfer pricing purposes. Guidelines on adjustments to be provided is found in paragraphs 3.47-3.54 and in the Annex to Chapter III. The guidelines must be followed for computing arm's length principle, and for comparing comparable uncontrolled transactions. Reasonably accurate adjustments should be made to eliminate effect of any such differences.
Accordingly we direct Ld. AO/TPO to grant working capital adjustment in accordance with law.
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2021 (9) TMI 1445 - ITAT BANGALORE
TP Adjustment - Comparable selection - HELD THAT:- We direct exclusion of Persistent Systems Ltd., Larsen & Toubro Infotech Ltd. and Infosys Ltd. & Infobeans Technologies Ltd. from the final list of comparables.
We restore I2T2 India Limited, Evoke Technologies Limited and Melstar Information Technologies Limited to the file of AO/TPO for examining it afresh.
Working capital adjustment - We find merit in the submissions made by Ld. A.R. Accordingly, we restore this issue to the file of AO/TPO with the direction to grant working capital adjustment.
Transfer pricing adjustment should be restricted to the value of international transactions only - There is merit in the said contention as the whole purpose of transfer pricing exercise is to determine the Arms length price of international transactions. Accordingly we direct the AO/TPO to restrict the transfer pricing adjustment to the value of international transactions only.
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2021 (9) TMI 1444 - KARNATAKA HIGH COURT
Black Money - offence punishable under Section 50 of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 - Scope of total undisclosed foreign income and asset - revised ITR by disclosing the assets has been filed only after issuance of notice by the I.T. Department - HELD THAT:- In order to attract offence u/s 50 of the Black Money Act even in spite of filing the revised ITR under sub-section 5 of Section 139 of I.T. Act, if the assets were not disclosed, then only the prosecution can be launched under Section 50 of the Black Money Act. Therefore, the complainant alleging in the complaint that the assessee willfully has not disclosed the foreign assets in the ITR as well as revised ITR is not sustainable under the law. Therefore, filing of the complaint by the complainant under Sections 4 & 50 of the Black Money Act does not attract against the petitioner. Once he has filed the revised ITR under subsection 5 of Section 139 of the I.T. Act by declaring the assets, when there is no offence is made out, then conducting the trial is abuse of process of law.
The initial burden of proving the case is always with the complainant-prosecution and after discharging the initial burden, then the burden shifts on the accused to rebut the presumption available under the law. When the assets were already disclosed in the revised ITR u/s 139(5) of the I.T. Act, it cannot be said that there is any willful non-disclosure by the accused. When there is mens rea on the part of the accused, then the question of rebutting the presumption under Section 54 of the Black Money Act does not arise.
Even otherwise, if the assessee failed to disclose the foreign assets under sub-section (1) or sub-section (4) or sub-section (5) of Section 139 fails to furnish any information relating to any asset at any time during such previous year, the AO may direct that such person shall pay, by way of penalty as per Section 43 of the Black Money Act. Apart from that, it is not a case of the I.T. Department that there were any income yield by the petitioner from those assets.
Therefore, complaint itself is not sustainable once the assessee has already filed the revised ITR by disclosing the foreign assets and the question of saying that he has willfully failed to disclose the assets cannot be acceptable. When there is no offence is made out, then conducting the proceedings against the petitioner-assessee is abuse of process of law and hence, liable to be quashed.
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2021 (9) TMI 1438 - ITAT PUNE
TP addition - determining the ALP of the international transaction of Provision of software support services - Comparable selection - HELD THAT:- Companies functionally dissimilar with that of assessee need to be deselected.
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2021 (9) TMI 1436 - ITAT JODHPUR
Revision u/s 263 - as per CIT assessment is erroneous as reference to TPO was not made - HELD THAT:- The assessee has furnished all information as asked for by AO during the course of assessment proceedings and which have been duly considered by him as evident from the assessment order - AO had issued detailed questionnaire raising various issues which were also replied by the assessee from time to time. The assessee had also appeared personally and filed the detailed replies to all the queries raised and books of accounts were also produced.
CIT has failed to specify as to how and on what ground the assessment order is erroneous and/ or which part of the CBDT instructions were not adhered to by the AO. Merely not recording the satisfaction AO on the records does not make the assessment order erroneous and prejudicial to the interest of revenue, as is decided in the various judicial pronouncement by various courts. We have also perused Instruction no 3/2016 and are of the opinion that it was not mandatory for the AO to make a reference to the TPO. Even as per the order and the show cause notice u/s 263 which has been issued it is evident that the selection of the case was for complete scrutiny and the issues was not on transfer pricing parameters risk factors.The Instruction No. 3 of 2016 in para 3.3 states that where cases are selected for scrutiny on non transfer pricing risk parameters but also having international transactions or specified domestic transactions, shall be referred to TPO in specified circumstances.
The clause (a) states where there are international transactions or specified transactions or both and the taxpayer has not filed any report required to be submitted under section 92E. This is not a situation in the case of the assessee and report was submitted and also during the assessment the same was submitted. The second situation where in previous assessments if any addition on account of transfer pricing adjustment of more than ten crores and addition being upheld in appellate proceedings is also not applicable in the case of the assessee, and this is not a case where search or seizure or survey operations had been carried out. In such a situation it cannot be said that the assessment is erroneous as reference to TPO was not made.
As in relation to the query letter issued by the AO reply was duly submitted to the AO on various issues which were raised and the assesseehad also appeared personally and filed the detailed replies to all the queries raised and books of accounts were also produced. The PCIT has failed to specify as to how and on what ground the assessment order is erroneous and/ or which part of the query was not properly examined. As regards claim of bad debts and foreign exchange fluctuation the issue was duly examined by AO and we find nothing has been pointed out with regard to the allowability of the same or as to how the decision of the AO was erroneous or prejudicial to the interest of revenue.
We hold that the order u/s 263 cannot be sustained as we find that the assessment order passed by the AO cannot be said to be erroneous orprejudicial to the interest of revenue, and accordingly the order made u/s 263 is quashed. - Decided in favour of assessee.
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2021 (9) TMI 1435 - ITAT HYDERABAD
Exemption u/s 11 - cancelling the assessee’s Section 12AA registration - HELD THAT:- We find no reason to express our agreement with the Revenue’s arguments supporting the same. This is for the precise reason that the CIT(E) passed his impugned order in furtherance to the corresponding show cause notice dt.08-02-2018 which had in fact been issued by the DCIT(E) only. This latter authority has nowhere been vested any jurisdiction to issue such a show cause notice u/s.12AA of the Act.
Case law – CIT Vs. Modern School Society [2019 (2) TMI 824 - SC ORDER] holds that whilst affirming the corresponding hon'ble high court’s judgment [2018 (7) TMI 1874 - RAJASTHAN HIGH COURT] that any order passed under the provisions of the Act by an authority without having any jurisdiction is a non est action only.
CIT-DR fails to dispute that the CIT(E) had not issued any other show cause notice proposing to finalise the impugned action. We therefore hold that the CIT(E)’s impugned order is not sustainable on law since based on an invalid show cause notice. Quashed accordingly.
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2021 (9) TMI 1434 - ITAT DELHI
MAT computation u/s 115JB - exclusion of Interest Subsidy and of Excise Duty Refund being capital in nature - HELD THAT:- We find, the issue stands squarely covered in favour of the assessee by the decision of the Hon’ble Calcutta High Court in the case of PCIT vs. Ankit Metal & Power Ltd. [2019 (7) TMI 878 - CALCUTTA HIGH COURT]
Since, in the instant case, the Revenue has accepted the order of the CIT(A) in holding that interest subsidy and Excise Duty refund are capital receipts, therefore, respectfully following the decision of the Hon’ble Calcutta High Court in the case of Ankit Metal & Power Ltd., cited (supra) and in absence of any contrary material brought to our notice, we hold that the above two receipts being not in the nature of income cannot be included for the purpose of computation u/s 115JB - We, therefore, set aside the order of the ld.CIT(A) on this issue and allow the grounds raised by the assessee.
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