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Income Tax - Case Laws
Showing 261 to 280 of 9151 Records
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2015 (12) TMI 1456
Disallowance u/s.14A - CIT(A) deleted the addition on the ground that provisions of section 14A r.w.Rule 8D are not applicable to dividend income on shares held as stock in trade - Held that:- As decided in case of Kunal Polymers Pvt. Ltd. [2015 (10) TMI 2373 - ITAT PUNE ] it is an undisputed fact that the shares are held by the assessee as stock-in-trade. The assessee has earned dividend income on such shares. The assessee has not held the shares for earning dividend income. Dividend income is incidental to the share trading business of the assessee. Thus, no disallowance u/s. 14A is warranted on dividend earned on shares held as stock-in-trade. Our view is fortified by the decision of Mumbai Bench of the Tribunal in the case of DCIT Vs. M/s. India Advantage Securities Ltd. [2012 (11) TMI 458 - ITAT, MUMBAI]. Also see CCI Ltd. Versus Joint Commissioner of Income-tax [2012 (4) TMI 282 - KARNATAKA HIGH COURT] - Decided in favour of assessee.
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2015 (12) TMI 1455
Allowance of claim of exemption u/s 10(30) - CIT(A) directing the ld. AO to verify the certificate issued by the Tea Board for the subsidy paid to the assessee - Held that:- We have heard the ld. AR on this issue and held that in the interest of justice and fair play, this issue be restored to the file of the ld. AO to verify the certificate from Tea Board for the subsidies paid to the assessee during the assessment year under appeal and direct the ld. AO to grant exemption u/s 10(30) of the Act only to the extent of subsidies received during the year subject to production of certificate from Tea Board. Decided in favour of revenue for statistical purposes.
Addition employees’ contribution to Provident Fund (P.F.) - CIT(A) deleted the addition - Held that:- This issue is directly covered in favour of the assessee by the decision of the Hon’ble Apex Court in the case of Vinay Cement reported in (2007 (3) TMI 346 - Supreme Court of India) wherein it has been held that statutory items like Provident Fund and ESI, if paid before the due date of filing the return of income have to be allowed irrespective of the fact whether the contributions related to the employee and employer. However, we are not able to verify from the materials available on record as to whether the provident fund remittances were indeed made before the due date of filing the return of income by the assessee. Accordingly, we set aside this issue to the file of the ld. AO with the direction to verify the dates of remittance and if the same is paid before the due date of filing of return of income, the deduction should be granted to the assessee - Decided in favour of revenue for statistical purposes.
Deduction towards cess on green leaf - CIT(A) allowed claim - Held that:- This issue is squarely covered by the decision of the Hon’ble Calcutta High Court in the case of CIT vs AFT Industries Ltd. reported in ( 2004 (7) TMI 81 - CALCUTTA High Court) wherein held entire amount paid as cess on green leaf seems to be eligible for deduction - Decided against revenue
Claim of subsidy for the purpose of ascertaining the book profit u/s 115JB - CIT(A) allowed claim - Held that:- this issue is only consequential to the first ground raised by the revenue. There, we have directed the ld. AO to grant exemption u/s 10(30) of the Act towards tea plantation subsidy to the extent of subsidy received during the year subject to production of certificates from Tea Board to that effect. We hold that whatever is allowed by the ld. AO pursuant to that ground, the same amount had to be reduced from the net profit as per profit and loss account towards exemption u/s 10(30) of the Act for the purpose of ascertaining the book profit u/s 115JB of the Act - Decided in favour of revenue for statistical purposes.
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2015 (12) TMI 1454
Addition u/s 69B - unexplained investment made on the basis of DVO's report - CIT(A) deleted the addition - Held that:- Following the judgment of CIT vs. Lucknow Public Educational Society [2011 (3) TMI 1326 - Allahabad High Court ] we hold that the reference to the DVO without rejecting the books of account is bad and therefore the valuation report submitted consequent thereto cannot be relied on for making an addition. Thus, no addition on account of unexplained investment is sustainable in the eyes of law. We, therefore, find no infirmity in the order of the ld. CIT(A) and we accordingly confirm the same. - Decided in favour of assessee.
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2015 (12) TMI 1453
Addition u/s 68 - CIT(A) deleted the addition - Held that:- The Assessing Officer made this addition on account of unsecured loan as the assessee was not explained the source of cash credit. The Assessing Officer came to this conclusion mainly on the ground that the assessee-company failed to prove that the statement recorded from Shri Mukesh C. Choksi and Shri Jayesh Sampat by the Investigation Wing was incorrect. According to the Assessing Officer, the genuineness of the transaction could not be proved. In appeal, the CIT(A), having considered the submission of assessee-company, has rightly deleted the addition on both accounts (i.e. ₹ 85 lakhs on account of share application money and ₹ 30,47,169/- on account of unsecured loan) by holding that the assessee-company had duly discharged the initial burden in respect of identity, creditworthiness and genuineness of all transactions by relying on various judicial pronouncements.
Thus, this addition is not justified under the provisions of Section 68 of the Act. Therefore, we do not see any reason to interfere with the findings of the CIT(A) who has rightly deleted the amount on account of unsecured loan which was made by the Assessing Officer u/s 68 of the Act. - Decided in favour of assessee
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2015 (12) TMI 1423
Disallowance under Section 14A - whether the ITAT was correct in affirming the order of CIT(A) which had confined the disallowance under Section 14A - whether the ITAT could read down Rule 8D (2)(ii) of the Income Tax Rules 1962 and whether that was beyond the jurisdiction of the ITAT? - Held that:- In the case in hand, in Note 4 of the computation of income submitted by the Assessee, the total interest debited to the profit and loss account was ₹ 5,52,83,131. There was an entry regarding interest on loans given to two entities. After accounting for the other interest expenditure, the Assessee computed the total interest expenditure which was allowable as ₹ 83,90,178. In the computation drawn up by the Assessee, the entire interest expenditure was incurred for earning either taxable income or exempt income. There was no interest amount which was not directly attributable to either the tax exempt or taxable income. The ITAT, therefore, correctly observed in the present case "no portion of interest really survives for allocation under Rule 8D (2) (ii)". However, as rightly pointed out by the ITAT, since the Assessee did not challenge the order of the CIT (A) to the extent it restricted the disallowance, that part of the order of the CIT (A) remained.
The point concerning Rule 8D (2) (iii) does not appear to have been urged by the Revenue before the ITAT and therefore not considered by it. In any event that does not affect the interpretation of Rule 8D (2) (ii) which was the only issue considered by the ITAT in the impugned order. For the aforementioned reasons, the impugned order of the ITAT does not call for any interference - Decided in against revenue.
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2015 (12) TMI 1422
Entitlement for exemption under Section 11 - nature of interest income from FD with the banks - the respondent being a Trust not having submitted Form No.10 and not having applied 85% of income towards Charitable & Religious purposes - Held that:- Assessee is a statutory authority created under the Karnataka Improvement Boards Act to carry out public purposes. Therefore, ratio of judgement in the case of CIT v. Gujarat Maritime Board [2007 (12) TMI 7 - SUPREME COURT OF INDIA ] is applicable to the facts of this case wherein held that Section 10(20) and Section 11 of the 1961 Act operate in totally different spheres. Even if the Board has ceased to be a "local authority", it is not precluded from claiming exemption under Section 11(1) of the 1961 Act. Therefore we have to read Section 11(1) in the light of the definition of the words "charitable purposes" as defined under Section 2(15) of the 1961 Act.. - interest earned by parking the funds received from the Government also assumed the character of funds provided by the Government and cannot be brought to tax as Income from other sources.
In the premise, we are of the considered view that the argument advanced on behalf of the Revenue that assessee was not entitled for exemption under Section 11 of the Act for the reasons recorded by the Commissioner of Income Tax, is untenable and deserves to be rejected and accordingly rejected. - Decided in favour of assessee
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2015 (12) TMI 1421
Entitlement to the benefit of long term capital gains u/s 54 - Held that:- Providing for short term and long term capital gains is a beneficial piece of legislation, whereby certain benefit in taxation is given to the assessee on fulfillment of certain conditions. Every such legislation is to be construed liberally in favour of the assessee, as it is for the benefit of the assessee. When the purpose is to give a benefit, then technicalities in law should not come in the way of such benefit being given. In the facts of the present case, applying the ratio of the decision of the Apex Court in the case of Sanjeev Lal (2014 (7) TMI 99 - SUPREME COURT ), in our opinion, the assessee would be entitled to the benefit of long term capital gain. - Decided in favour of the assessee
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2015 (12) TMI 1420
Addition u/s.41(1)- unclaimed 'stale draft and pay orders' - ITAT deleted the addition - Held that:- Section 41(1) can be pressed into service when an allowance or deduction is sought to be made in respect of loss, expenditure or trading liability is incurred by the assessee. In the instant case, the sum of ₹ 58,38,581/- has remained with the assessee owing to the fact that the payees or holders of the draft/pay orders had not encashed them. The language employed by the legislature being unambiguous, it would be incongruous to construe the said sum as either a loss, expenditure or trading liability incurred by the assessee. Hon'ble Supreme Court in the case of T.V. Sundaram Iyengar (1996 (9) TMI 1 - SUPREME Court) held that the provisions of s.41(1) were not attracted in the facts of this case because the assessee's liability to pay back the amounts to its customers had not ceased. - Decided in favor of assessee
Depreciation on investments on government securities "held to maturity" - whether such securities were held as a investments and not as 'stock-in-trade'? - Held that:- Admittedly in the instant case, assessee was following the method of accounting namely, "at cost or market value, whichever is lower". Further, it is not in dispute that this practice was accepted by the Revenue throughout. Thus, in the light of the above pronouncement in the case of United Commercial Bank (1999 (9) TMI 4 - SUPREME Court) notwithstanding the preparation of the balance sheet and describing the security under a particular nomenclature in compliance with the directions/instructions issued by the RBI, the assessee would be lawfully entitled to submit the tax returns on the real taxable income in accordance with the method of accounting consistently and regularly adopted.- Decided in favor of assessee
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2015 (12) TMI 1419
Income from capital gain - whether should be included for the purpose of computing Book Profit under Section 115JB? - Held that:- The proviso to the said Section 211(3)(C) of the Companies Act makes it clear that the standards of accounting specified by the Institute of Chartered Accountants of India shall be deemed to be the accounting standards until the accounting standards are prescribed by the Central Government under the subsection 3(C).
The Assessing Officer has placed reliance on the accounting standards, vide No.9949 dated 25.1.1996 and has held that the transaction of sale property should have been brought into the profit and loss account as an extraordinary item since the assessee has failed to follow the accounting standards, determined the book profit after allowing the deduction towards cost as per provision to Section 115JB (2) of the Act. This order is confirmed by the appellate authority as well as by the ITAT.
However, this exercise of the assessing authorities, in recomputing the book profit of the assessee is contrary to the principles of law laid down by the Apex Court in Appollo Tyres (2002 (5) TMI 5 - SUPREME Court) wherein held that the only power vested with the Assessing Officer is to make increases and deductions as provided in the explanation to Section 115JB of the Act. Assessing Officer has no power to embark upon a fresh enquiry in regard to the entries made in the books of accounts of the company. In the light of the judgment of Apollo Types (supra), we are of the opinion that the Assessing Officer has no power to recompute the book profit and has to rely upon the authentic statements of accounts of the company, the accounts being scrutinized and certified by the statutory auditors though with a qualification, approved by the company in general body meeting and thereafter filed before the Registrar of Companies, who has a statutory obligation to examine and be satisfied that the accounts of the company are maintained in accordance with the requirements of the Companies Act. - Decided in favour of assessee.
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2015 (12) TMI 1418
Addition u/s 68 - CIT(A) deleted the addition - Held that:- Assessing Officer had received information from the Director of Income Tax (Investigation), New Delhi that those five share applicants have provided accommodation entry to the assessee. The persons who provide money to the taxpayers through cheques against receipt of cash are called as accommodation entry providers. However, we have also noted that the Assessing Officer did not carry out any independent inquiry in respect of the alleged accommodation entry provider, nor brought on record the statement or confession of alleged entry providers given before the officers of the Investigation Wing of Income Tax Department. The Assessing Officer has merely described theoretical information in respect of the informations collected by the Investigation Wing. He did not bring on record any documentary evidence leading to conclusion that those five share applicants were accommodation entry providers, whereas the assessee has submitted confirmation letter certificate of incorporation of share application money, a copy of PAN certificate, copy of acknowledgment of income tax return filed, copy of balance sheet and profit and loss account of share applicants.
In the case of Gangeshwari Metal (P.) Ltd (2013 (1) TMI 624 - DELHI HIGH COURT ), the Hon’ble High Court has held that when there was a clear lack of inquiry on the part of the Assessing Officer, once the assessee had furnished all the material, then in such eventuality, no addition could be made under Section 68 of the Act - Decided in favour of assessee
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2015 (12) TMI 1417
Addition on account of suppression of stock and difference in books of accounts and in not allowing the deduction u/s 10A - Held that:- The assessee disclosed the gold recovered from the wastage in its books of accounts after the survey and the same was sold which was also entered in the stock register. The department had accepted the books of accounts maintained by the assessee in its regular course of business. The assessee disclosed the sale of the gold weighing 12kg which was recovered from the wastage. When the assessee itself disclosed the sale of the gold obtained on recopying the wastage and disclosed the profit on the said sale in the books of accounts which had been accepted by the department. In our opinion, the value of 12kg gold recovered by the assessee from its customer in regular course of business was its income but the assessee was eligible for deduction u/s 10A of the Act on the said income of ₹ 1,20,00,000/-. In the present case, the deduction u/s 10A of the Act has not been denied by the AO. Therefore, the addition of ₹ 1,20,00,000/- made by the AO and sustained by the ld. CIT(A) was justified but the assessee is entitled for deduction u/s 10A of the Act on the said addition because the said income was directly related to the export business of the assessee. As regards to the another addition of ₹ 11 lakhs is concerned, the said amount was disclosed by the assessee itself to cover up the various discrepancies found during the course of survey but that discloser was also related to the regular business of the assessee and it was not from the sources other than the business. On the said income of ₹ 11 lakhs disclosed by the assessee, the exemption u/s 10A of the Act was available
In the present case, the assessee agreed during the course of survey for the addition only when discrepancies in the loose papers were found. The assessee surrendered ₹ 11 lakhs to cover up the irregularities of the business and short coming found during the course of survey. The said surrender was related to the regular business of the assessee and it is not brought on record that the assessee earned the said income from any other source. Therefore, the deduction u/s 10A of the Act was allowable to the assessee being 100% Export Oriented Unit established in SEZ on this income also. We order accordingly. In view of the above we uphold the addition made by the AO and sustained by the ld. CIT(A), however, the AO is directed to allow the deduction u/s 10A of the Act. - Decided partly in favour of assessee
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2015 (12) TMI 1416
Rectification of mistake - registration as per the provisions of Section 12AA granted w.e.f. 31.03.2003 by the Commissioner of Income Tax whereas the first day of the financial year would be 01.04.2002 as per assessee - whether order under Section 154 of the Act in respect of section 12AA of the Act was not included in the list of orders which are appealable, the appeal filed against the said order is not maintainable? - Held that:- It is undisputed that the order of rectification to the order passed under Section 12AA of the Act is not in the list of the orders appealable to the Tribunal. The legislature has included the order passed under Section 154 amending the order under Section 263 of the Act, however, the order rectifying order under Section 12AA of the Act has not been included. It is the settled position of law that there is no inherent right of appeal to any assessee and the right of appeal is only statutory one. Therefore, unless the statute specifically provides for filing an appeal against a particular order, no right of appeal can be said to be conferred upon an assessee. See case of Pradeep Singh Vs. Deputy Commissioner of Income Tax [2005 (2) TMI 459 - ITAT DELHI-F ].
The appeal filed by the assessee against the order passed under Section 154 of the Act to the order under Section 12AA is not maintainable. However, the assessee may file an appeal against the order passed under Section 12AA of the Act by the Commissioner of Income Tax in compliance to the direction of the Tribunal with a request of condonation of delay, if so advised.
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2015 (12) TMI 1415
Registration u/s 12AA denied - CIT(A)'s first conclusion is that amendment carried out through supplementary deed was illegal and unacceptable - Held that:- In the case in hand also the amendment has been carried out under the authority granted by the settler company and it was registered with Registration Authorities rather than court. The supplementary deed was otherwise not found to be fictitious or shame by the learned Commissioner of Income-tax in case in hand. We find that in view of clear judgment of the Hon’ble High Court of Rajasthan in the case of Laxminarayan Lath Trust (1987 (5) TMI 12 - RAJASTHAN High Court) the amendment carried out in the trust deed through supplementary deed without approval of Court was a valid one and there was no illegality in the same.
The second conclusion of the ld. Commissioner of Income-tax that certain provisions of the trust deed were not clear. We are of the opinion that non10 clarity of one or two words in the deed can’t be a ground for refusing the registration if otherwise the trust fulfills the conditions for registration.
The third conclusion drawn by CIT(A) that certain clauses of trust deed envisage control of the company over the activities of the trust and serve the interest of the settler company. It is seen that, sometimes settler wants to have some sort of control over the affairs of the trust so as to ensure that Trust work in the direction of its objects and for this purpose , the settler also become one of the trustee of the trust and exercise control over the affairs of the trust. In the case in hand, the settler has not become trustee. Further, CIT(A) has not brought on record how the trust has served the interest of the company. If it was so , before refusing the registration, he was required to clearly record such activities in his order. We are of view that doubt raised by the CIT(A) that the trust would serve the interest of the settler company, is without any evidences and based only on the presumptions and possibilities. The object clauses containing welfare of the employees had already been removed through supplementary deed and now there was not any object which was in violation of charitable object as defined in section 2(15) of the Act.
Fourth conclusion also the CIT(A) has expressed general notion that trustees being employees of the company look forward toward corporate office and do not carry out activities of the trust independently. We find nothing wrong in taking certain assistance of ministerial or clerical level for carrying out meeting etc. from the office of settler. The CIT(A) was required to examine whether taking any assistance rendered the activities of the trust not genuine. He has not given any finding in this respect. Further, the last conclusion drawn by the CIT(A) is that the activities of the trust were very little and did not instill any confidence. It was the first year of the activity of the trust and the trust had started the activities in the nature of relief to poor like distribution of blanket etc. The activities were not started as large scale as there were no funds in the trust. As regards to the activity, the ld. Commissioner has not concluded that same were not genuine, might be at small scale. The discrepancies observed by the ld. Commissioner in recording bills or minutes of meeting are not material in sense when we look the activities which were carried out were charitable in nature. The learned Commissioner of Income-tax (Departmental Representative) has made allegations that the trust was acting as subsidiary of the company. We find that all the allegations are devoid of evidences as far as the charitable activities carried out by the trust are concerned. - Decided in favour of assessee
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2015 (12) TMI 1414
Penalty u/s.271(1)(c) - Held that:- As decided in assessee's own case for the assessment year 2004-05 case for levy of penalty for concealment of income has to be evaluated in terms of provisions of Explanation 1 to Section. 271(1)(c), as per which if in relation to any addition in the assessment, the assessee offers no explanation or offers explanation which is found to be false or is not able to substantiate the explanation and is also not able to prove that the explanation is bonafide, the addition made would amount to concealment of particulars of income. It is a settled legal position that penalty proceedings are different from assessment proceedings and the findings given in the assessment though it may constitute good evidence but same is not conclusive in the penalty proceedings Further, merely because additions have been confirmed in appeal it cannot be the sole ground for coming to the conclusion that the assessee had concealed any income. We are of the view that in the absence of complete and convincing corroborative evidence, the Revenue may justify addition, but in the matter of penalty proceedings, the onus lies heavily on the Revenue to prove that the assessee had concealed its income or has filed inaccurate particulars of its income. Further the decision relied upon by Revenue is distinguishable on facts and therefore cannot be applied to the facts of the present case. In view of the aforesaid facts we are of the view that in the present case no penalty is leviable u/s 271(1)(c) and therefore direct its deletion - Decided in favour of assessee
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2015 (12) TMI 1413
Undisclosed income - Held that:- The assessee submits that this addition sum comprises of access money collection of ₹ 2,02,350/- as per a diary seized . The same is stated to have been received from four parties namely; Prasam Hajarnis, Mrs Anila, Mr. Dinesh, Mr. Kaushik and Mr. Jai Prakash to the tune of ₹ 20,750/- each in first two cases and ₹ 95,125/- , ₹ 45,125/- and ₹ 20,600/- respectively. These figures form part of record Annexure A- 4 page 65 of the paper book. The assessee claims to have returned these sums back to its above stated parties. We put up a specific query in the course of hearing as to whether it had filed any material on record in the shape of seized diary or other evidence proving the same. The reply given is in negative. This leads us to a conclusion that since the impugned excess collection is proved without any rebuttal of its being returned back to the payers, the Assessing Officer has rightly made the corresponding addition of ₹ 2,02,350/- in assessee’s case. - Decided against assessee
Disallowance of expenditure - Held that:- The Assessing Officer has accepted assessee’s expenses claimed regarding brokerage, misc. items and the once pertaining to specific payees in question. The assessee takes us to paper book containing names of four parties to have received the same. However, we do not find any vouchers, bills, and other documentary evidence forthcoming from the case file. The same appears to be the reason on Assessing Officer’s part in disallowing these expenses. This position continues before us as well. We uphold the Assessing Officer’s corresponding findings and hold that the assessee has not been able to substantiate its expenditure claim - Decided against assessee
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2015 (12) TMI 1412
Addition on account of low GP - CIT(A) deleted the addition of Gross profit at 10% of total turnover made by the Assessing Officer - Held that:- Decided in favour of the assessee by decision of a coordinate bench, in the group cases of ITO vs. S. N. Rathi & Others [2015 (12) TMI 766 - ITAT AHMEDABAD] Assessing Officer did not point out any comparable cases or any special material which has an influence for giving rise to such a profit. The other discussion made by Assessing Officer in assessment order relates to the issue, as to why alleged books of accounts should not be rejected. But after rejection of the books, the ld. Assessing Officer failed to substantiate his conclusion for computing the profit at @ 10% of the turnover. Taking into consideration the finding of the Commissioner of Income Tax(A), we do not see any reason to interfere in his orders in all the assessment years. Thus, grounds of appeal of the assessee as well as by the revenue on this issue, in all these assessment years are rejected. The Ld. Assessing Officer shall compute the profit from the benami bank accounts @ 2.45% of the turnover - Decided against revenue.
Addition on account of cash credit - CIT(A) deleted the addition - Held that:- In the absence of any infirmities having been pointed out in the reasoning adopted by the ld. CIT(A), we see no reasons to disturb the conclusions arrived at in respect of addition for unexplained credits of ₹ 3,00,000/- and ₹ 2,00,000/- having been deleted. The interest disallowance is only consequential in nature, and, there is no good reason to disturb the same either.- Decided against revenue.
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2015 (12) TMI 1411
Entitlement for deduction u/s 80P - CIT(A) deleted the addition holding that the assessee being Cooperative Credit Society is not a Co-operative bank hence is entitled for deduction - Held that:- CIT(A) is justified in directing the AO to allow the deduction claimed by the assessee u/s 80P of the Act on the reason that the assessee, a cooperative credit society is not a bank for the purposes of section 80P(4) of the Act. - Decided against revenue.
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2015 (12) TMI 1410
Transfer pricing adjustment - whether the PSM is the appropriate method as adopted by the assessee or TNMM method as adopted by the AO? - Held that:- In the present case, we have to see as to whether the PSM is the appropriate method as adopted by the assessee or TNMM method as adopted by the AO. In the present case, the different activities performed by the Infogain India i.e. assessee and Infogain US are inextricably linked and both the entities are contributing significantly to the value chain of provision of software services to the end customers. In the instant case Global Delivery Organization Group (GDO) in India is responsible for delivery of services to the customers globally. The primary objective of the group is to bring synergies amongst geographic groups and project, to make efficient use of the available resources, to broaden areas of service offerings, to improve opportunity fulfillment ration, and to maximize customer satisfaction with each project execution. However, the TPO had not considered the role of the GDO. In the present case, the TPO mentioned that the shifts in the assessee’s case started from 2005 onwards, however, the assessee chose to change the method in the financial year under consideration, the explanation of the assessee was that though the transition process started from September 2005 which was very gradual and led to the complete shift in the functional matrix of Infogain Group over a period of 2-3 years, therefore, the pricing model was changed w.e.f April 2007, the said explanation appears to be a plausible. In the instant case, the assessee assigned weights to each activity keeping in view the relative importance in the entire value chain, based on interviews with the key management personnel and the functions in the value chain of software services provided by the Infogain Group to the customers based in the US were identified and weights were assigned to the functions having regard to their relative importance in the value chain, which is evident from page nos. 229 to 234 of the assessee’s paper book wherein the functions are clearly designed in a tabular form. In the present case, both the parties i.e. Infogain India (assessee) and Infogain US are making contribution. Therefore, the Profit Split Method is the most appropriate method for determination of ALP.
Therefore, we are of the view that the conclusion of the TPO that the PSM is adopted by the assessee only to camouflage loss at the net level is merely an allegation and hence devoid of merit. In the present case, the assessee adopted Profit Split Method, for application of the said method, the provisions are contained in Rule 10B(1)(d) of the Income Tax Rules, 1962. According to the said provisions the Profit Split Method is applicable mainly in international transactions which are so interrelated that they cannot be evaluated separately, for the purpose of determining the arms’ length price.
How the allocation is to be done for residuary profits? - Held that:- It is well settled that as per the Rule 10D, the benchmarking should be done with the external uncontrolled transactions, however, in the present case, it is not possible to get a comparable. Therefore, such allocation can be done on the basis that how much each independent enterprise might have contributed. Therefore, relative contribution has to be determined, based on key value drivers because benchmarking is not practicable. In the present case, as the comparables having similar transactions would be difficult to find out, therefore, in such a situation, a harmonious interpretation of the provisions is required to make the rule workable, so as to achieve the desired result of the determination of the ALP. Both the OECD Transfer Pricing Guidelines as well as the UN draft method of transfer pricing for developing countries, suggest that an allocation of residual profits under PSM should be done, based on contributions by each entity. In the present case, since the department has accepted in the preceding year and the succeeding year 40:60 ratio between the Infogain India and Infogain US and if the facts are similar for the year under consideration then no deviation is to be done. We, therefore, set aside the issue to file of the AO/TPO to decide the issue following the clear directions given in former part of this order as well as by the Coordinate Bench in the aforesaid referred to orders and after providing due and reasonable opportunity of being heard to the assessee.
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2015 (12) TMI 1409
Registration u/s 12A(a) denied - Held that:- When the assessee has produced certain evidence regarding free coaching camps distribution of kits etc. registration can not be denied on the ground that the activity is insignificant.
Collection of entry fee and subscription /contribution and utilising the same for incurring expenditure on tournaments etc. cannot be a reason for coming to conclusion that the activity of the assessee is on commercial lines. Thus rejection of registration on this ground is bad in law.The finding that the assessee society has no activity after 2003 is contrary to the facts on record, as evidenced by the income and expenditure account for the year ended 31st March, 2013.
In view of the above discussion we direct the Ld. CIT(A) to grant registration to the assessee u/s 12A/12AA of the Act. - Decided in favour of assessee
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2015 (12) TMI 1407
Estimation of Gross Profit rate - Gross Profit rate of 11.5% confirmed by CIT(A) - Held that:- It is undisputed that the books of accounts were never produced before the Assessing Officer. Certain other alarming facts were also found by the Assessing Officer, the obvious conclusion made by him was to reject the books of account. The assessee preferred not to press the ground related to rejection of books of accounts before us. In such a scenario the estimation of Gross Profit rate is a must. The assessee cannot plead to accept the Gross Profit rate as declared by him, when books of A/c and details were not produced before authorities below. The CIT(A), in this case has given a very detailed reasoned finding as to the fact that, why a Gross Profit rate of 11.5% may be applied.
Considering facts of case it is clear that there is increase in turnover of assessee as compared to earlier years. The Ld. CIT(A) considered past history of assessee for estimating profit when no books were produced before AO. We rely on decision of Punjab & Haryana High Court in case of CIT Vs. Rajinder Parshad Jain, [ 2014 (12) TMI 567 - PUNJAB & HARYANA HIGH COURT] - No infirmity in the order of CIT(A) on this issue. The Gross Profit rate 11.5% as estimated by the CIT(A) seems reasonable in the facts & circumstances of the case.
As we have upheld the estimation of Gross Profit @ 11.5% while adjudicating the earlier grounds, no other disallowance of any expenses separately is called for. In view of the above, income having been estimated. Any other disallowance is not warranted. - Decided in favour of assessee.
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9911796707
