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Income Tax - Case Laws
Showing 41 to 60 of 9151 Records
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2015 (12) TMI 1846
TDS u/s 194J - Disallowing the expenses on account of violation of the provisions of TDS - payment from the party/ organizers for the artistes - assessee submitted that she is acting as a co-ordinator between artists and the organizer for arranging musical programmes - HELD THAT:- The assessee receives the payments from the organizers after TDS and make over the negotiated amount without TDS since the appellant is representing and acting for and on behalf of the organizers. All the artistes are very famous, widely acclaimed and have themselves furnished declaration with PAN that they will be directly responsible for their respective tax matters and one of them, Alka Yagnik even unequivocally stated that she had already paid income tax on such income.
DR vehemently relied on the orders of authorities below. We find from the aforesaid discussion that AO disallowed the expenses claimed by assessee due to violation of provision to Sec. 194-J of the Act. The argument of the assessee that the recipient of income has paid the tax in their respective hands has also been regarded. However, we find that there is an amendment in proviso to Sec. 40(a)(ia) r.w.s. 1st proviso to Sec. 201, wherein, if any payee has paid the taxes by offering / disclosing the said receipt in his / her return of income, then the payer (the assessee herein) should not be treated as assessee in default and no disallowance u/s/. 40(a)(ia) of the Act could operate in that scenario.
As relying on Ansal Land mark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] we deem it fit and appropriate in the interest of justice and fair play to set aside this issue to the file of Assessing Officer to decide the issue afresh in the light of the aforesaid judgment to ensure whether the deductee has paid taxes on their income. Accordingly, we direct the Assessing Officer to verify whether the payees have included the subject mentioned receipts in their respective returns and paid taxes thereon or not. If that is so, then disallowance u/s. 40(a)(ia) of the Act shall not be made in the hands of the assessee. Accordingly, the ground raised by assessee is allowed for statistical purposes.
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2015 (12) TMI 1844
Non admission of addiontioal evidence - CIT(A) has passed the appellate order without considering the application u/s. 250(4) read with Rule 46A of the Income Tax Rules filed by the assessee - HELD THAT:- CIT(A) has not considered the application moved by the assessee for leading additional evidence u/r. 46A of the Rules. In order to meet the ends of justice, we are of the considered view that the order passed by learned CIT(A) without deciding the application for leading additional evidence moved by the assessee is not sustainable in the eyes of law and therefore the same is set aside and send back to the file of learned CIT(A) with the direction to decide the application moved by the assessee u/r. 46A after providing opportunity to the assessee. Appeal filed by the assessee is allowed for statistical purposes
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2015 (12) TMI 1843
Dismissal of appeal for non-prosecution - HELD THAT:- During the course of hearing today, nobody was present on behalf of the assessee neither any adjournment was sought. The notice of hearing was sent to the assessee through Registered Post on 05.11.2015, which has not yet been returned back by the Postal Authority. We find that on earlier occasion, when the case was listed the matter was adjourned at the request of the assessee. It, therefore, appears that the assessee is not interested to prosecute the matter.
The law aids those who are vigilant, not those who sleep upon their rights. This principle is embodied in well known dictum, “VIGILANTIBUS ET NON DORMIENTIBUS JURA SUB VENIUNT’. Considering the facts and keeping in view the provisions of rule 19(2) of the Income-tax Appellate Tribunal Rules as were considered in the case of CIT vs. Multiplan India Ltd.[1991 (5) TMI 120 - ITAT DELHI-D] we treat this appeal as unadmitted.
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2015 (12) TMI 1842
TP Adjustment - disallowance of the corporate service charges - HELD THAT:- It is seen from the DRP’s order for A Y 2010-11 that observing that the facts of the matter are similar to those for A. Y. 2009-10, the DRP followed the same findings and decisions therein. In that view of the matter, we follow the decision of the co-ordinate bench in the assessee’s own case for A. Y. 2009-10 [2015 (9) TMI 286 - ITAT MUMBAI] and accordingly, in the interest of equity and justice, remit this matter of the computation of the ALP of the international transactions on account of the payment of corporate service charges by the assessee to its AE, to the file of the DRP for fresh adjudication by way of a speaking and reasoned order after affording reasonable opportunity to the assessee of being heard. It is accordingly ordered. Consequently, ground no. 1 is treated as allowed for statistical purposes.
Disallowance of Depreciation on goodwill - assessee contends that the AO erred in not following the directions issued by the DRP to allow the assessee depreciation on goodwill u/s. 32(1)(ii) - HELD THAT:- For A. Y. 2010-11 that the AO has not considered and allowed the assessee depreciation on goodwill of polymehtane business and textile effects business as directed by the DRP - We, therefore, direct the AO to follow the directions of the DRP and compute and allow the assessee depreciation on goodwill for A. Y. 2010-11.
Depreciation on intangibles - HELD THAT:- We find that the very same issue of allowability of the assesee’s claim of depreciation on intangible assets viz. Material supply contracts, brand usage and distribution networks was considered at length by a coordinate bench of this Tribunal in[2015 (9) TMI 286 - ITAT MUMBAI] wherein it has been held that the assessee is entitled to claim depreciation on intangible assets. Decided in favour of the assessee.
Disallowance u/s. 14A r.w.r. 8D - As contended that the authorities below ought to have taken into account that investments made were by way of strategic investments in its subsidiary concern out of interest free funds - HELD THAT:- Following the aforesaid decisions in the cases of Holcim India (P) Ltd. [2014 (9) TMI 434 - DELHI HIGH COURT] and Cheminvest Ltd.[2015 (9) TMI 238 - DELHI HIGH COURT] we hold that since the assessee has not earned any exempt income in the year under consideration, i. e. assessment year 2010-11, no disallowance u/s. 14A of the Act can be made and accordingly delete the disallowance made in this regard by the authorities below.
Disallowance of Expenditure on payment basis u/s. 43B - not allowing deduction for payment it made in connection with liabilities of CIBA Speciality Ltd. taken over by way of slump sale - assessee submitted that the assessee had taken over the liabilities of CIBA Ltd. and that these being known liabilities of which the assessee had to bear the expenditure as per the agreement - HELD THAT:- The recovery of the debt is a right transferred along with the numerous other rights comprising the subject of the transfer. If the law permits the transferor to treat the whole or part of the debt as irrecoverable and to claim a deduction on that account, the same right should be recognised in the transferee. It is merely an incident flowing from the transfer of the business, together with its assets and liabilities, from the previous owner to the transferee. It is a right which should, on a proper appreciation of all that is implied in the transfer of a business, be regarded as belonging to the new owner - See T. Veerbhadra Rao case [1985 (7) TMI 2 - SUPREME COURT] - Decided in favour of assessee.
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2015 (12) TMI 1841
Exemption u/s 11 - rejection of application for registration u/s 12A - assessee failed to produce necessary details and documents about objects of the trust and genuineness of the activity - HELD THAT:- The activities of the trust have to be considered if such registration is sought much after the formation of trust or after expiry of the earlier registration granted in favour of the trust.
The Hon’ble High Court in case of Meenakshi Amma Endowment Trust [2010 (11) TMI 853 - KARNATAKA HIGH COURT] has observed that if the assessee is seeking immediately after formation then, there is no provision under the Act for seeking such registration. If assessee satisfies the condition as required for registration u/s 12A. Further, the CIT(E) has not pointed out anything against objects of the assessee being not charitable in nature. Therefore, we direct the CIT(E) to grant registration u/s 12A to the assessee.
Recognition u/s 80G - CIT(E) has rejected the application of the assessee by giving reference of the order whereby application for registration u/s 12A was rejected - In view of our finding that registration u/s 12A, assessee is entitled for registration u/s 80G of the Act as well.
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2015 (12) TMI 1840
Disallowance of expenses - assessee did not carry out any business during the year - HELD THAT:- Unless there is some material on record to show that the assessee has completely abandoned the business. There is no finding by any of the authorities below that there was a cessation of business. It is not the case, as has been stated by the AO, that the assessee is claiming deduction of business expenses from rental income. The expenses incurred by the assessee are business expenses and just because there is no business income during the relevant period, such deductions cannot be declined. The depreciation is not in respect of the assets rented out either. The assessee is incurring is a business loss and thats all that matters. Whatever be the consequences of such losses on assessee’s ultimate tax liability does not govern the question whether deduction for expenses could be allowed or not - disallowances sustained by the CIT(A) infact deserve to be deleted - Decided in favour of assessee.
Unexplained credit - amount shown as deposit received from Pharmason Exports was added as unexplained credit by the Assessing Officer, for want of complete details and verifications - HELD THAT:- We are not inclined to uphold this addition. We have noted that the amount is received from the banking channel, it is duly referred to in the rent agreement itselfa copy of which was placed before us as well, and the assessee has regular dealing with the concern which has placed this security deposit. On these facts, this amount cannot be treated as unexplained credit. It stands duly explained. We, therefore, direct the Assessing Officer to delete this addition as well.
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2015 (12) TMI 1839
Additions u/s 40(a)(ia) - Whether disallowances on the basis of a deeming fiction, thereby causing great hardships to various tax payers even in some genuine cases? - HELD THAT:- Assessee should be provided with full opportunity to explain its case, before final tax liability is determined against it applying such deeming provisions. It is noted that second proviso was inserted to section 40(a)(ia) to mitigate hardships of the tax payers. The said proviso has been inserted to avoid the unintended consequences created by section 40(a)(ia). Under these circumstances, its benefit should be given to all the assessee irrespective to the fact that at what stage their cases are pending. It is further worth noting that in the case of CIT vs. Ansal Land Mark Township (P) Ltd. [2015 (9) TMI 79 - DELHI HIGH COURT] has discussed this entire issue at length, and held that second proviso is declaratory and curative and has retrospective effect from 1st April 2005. In view of this major legal development, we find that the assessee deserves another opportunity.
We send this issue back to the file of AO with the direction that he shall exercise his requisite powers under the law to call for requisite information from the concerned payees. The assessee shall also extend full cooperation to the AO by furnishing all the documents and details in the form of names and address, PAN nos. place of assessment and confirmations etc., to the extent as feasible for the assessee. Needless to add, the AO shall give adequate opportunity of hearing to the assessee. Thus, these grounds are allowed for statistical purposes.
Prior period expenses - HELD THAT:- We find that the claim of the assessee should not have been denied in this manner by the lower authorities. We send this issue back to the file of the AO to consider this claim after verification of requisite facts taking cognizance of the revised computation filed by the assessee during the course of assessment proceedings. Thus, this ground is allowed for statistical purposes.
Claim on account of contribution to PF and ESIC - HELD THAT:- As already held that the claim has been rightly allowed by the CIT(A), therefore, following our order as has been given in the asessee’s appeal, we uphold the order of Ld. CIT(A) on this issue, rejecting the grounds raised by the Revenue.
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2015 (12) TMI 1838
TP Adjustment - selection of MAM - appropriate method of accounting - whether the Profit Split Method (PSM) is the most “appropriate method’ when data is not available on the CUP method as most appropriate method - HELD THAT:- We find there are decisions to denounce for PSM and the choice is between the CUP and TNMM as the best appropriate method in matters of indenting international transactions. One of the decisions cited above also supports the CUP as the most appropriate method. We are of the opinion, in principle, we agree with the Ld Counsel’s argument that internal CUP is the most appropriate method in this kind of factual situation.
Percentage of commission in ALP studies - correctness of 5% as the Arm’s Length Price (ALP) in benchmarking the transactions with Associated Enterprise (AE) - HELD THAT:- Rate of 1.35% ( in the case of Cisco Systems [2011 (9) TMI 477 - ITAT, BANGALORE] and 1.49% [in the case of Hoganas India Private Limited vs. DCIT [2013 (9) TMI 369 - ITAT PUNE] have to be rejected considering the rates approved in the case of Sumitomo Corporation (2.26%) [2013 (12) TMI 594 - ITAT DELHI] and Bayer Material Science (5%) [2011 (12) TMI 393 - ITAT MUMBAI]. In our opinion, to remove the statistical error, if any, the average of these two comparables should be considered to arrive at the appropriate rate of ALP for benchmarking the impugned transactions. Accordingly, 3.63% should be appropriate rate to be adopted by the AO for calculating the adjustments to be made. Thus, we partly allow the relevant grounds of the assessee as the case may be. Accordingly, AO is directed to adopt 3.63% as appropriate rate of ALP for benchmarking the impugned transactions.
Addition u/s 40(a)(ia) - effecting TDS on the payments made, which are actually the case of reimbursement of expenses - HELD THAT:- Such expenditure by way of reimbursement of salaries to Genius company do not attract TDS provisions and therefore, the provisions of section 40(a)(ia) need not be invoked. It is nobody’s case that the payments in question are not in the reimbursement of the salary of the deputed personnel by the Genius. Considering the same, we delete addition on this account and allow the Ground no.2 raised by the assessee.
Addition @ 10% of the cost of consumables and expenses for want of bills - AO made addition out of operating and other expenses on ad-hoc basis - Revenue relied on the order of the AO / DRP and submitted that the onus is on the assessee to demonstrate the genuineness of the expenses when a claim is made u/s 37 - HELD THAT:- We are of the opinion that the decision of the DRP and the AO on this issue is fair and reasonable and the same does not call for any interference. Accordingly, these two grounds are dismissed.
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2015 (12) TMI 1836
Capital gain - right of possession of the flat was a legal right which had to be extinguished by not only a process of law but also substantial payment by the other party - Addition u/s 68 - adverse possession of the disputed flat - ‘protective assessment - assessee has transferred the sundry creditor liability which was arising as a result of settlement with Ms/ Percept Advertisement Ltd. to its capital account - HELD THAT:- Any profit or gain arising out of this transfer is, thus, liable to be assessed to tax under the head ‘capital gains’ as has been done by the AO. However, this capital gain is required to be computed for tax purpose in accordance with the computation provisions of Sec. 48 of the Act. It may, however, be clearly seen that there was no cost of acquisition of the right of possessions of the said disputed flat, as the assessee did not spend anything for obtaining the said possession. Hence, the mechanism for Computation of capital gain with reference to ‘cost of acquisition’ of the asset transferred cleaerlyfails. The ultimate result is, thus, that the above mentioned ‘capital gains’ is not exigible to income tax, as has been held by the Hon'ble Supreme Court in the case of Srinivasa Setty [1981 (2) TMI 1 - SUPREME COURT] and PNB FINANCE LTD. [2008 (11) TMI 7 - SUPREME COURT]
In the present case, assessee was having adverse charge on the property and charge of tax on such transaction has nowhere been definite under the Act. Therefore, we are holding that this transaction out of purview of tax. In our considered view, we reverse the orders of authorities below and delete the addition made by Assessing Officer - Decided in favour of assessee.
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2015 (12) TMI 1835
Addition treating seized documents as "dumb document" - addition of undisclosed purchases and investments and also undisclosed expenditure and investment - HELD THAT:- We find from the facts of the case as well from the remand report of the AO, who has simply mentioned that the relevant document has been seized from the custody of the assessee and hence, the assessee is obliged to explain the seized document properly. Further, the AO in its remand report has mentioned that no clear cut explanation has been furnished. In this connection the CIT(A) sought certain clarifications from the AO relating to the remand report furnished by him.
A.O. vide his letter dated 2l.12.2011 responded to this letter by more or less reiterating the facts stated in the earlier remand report dated 29.3.201l. However, he remained silent about my query as to whether any statement of the assessee has been recorded regarding the contents of the seized documents BRI/20 Page-7 during the course of search or during the course of post search investigation which leads me to presume that no such statement was recorded regarding the contents of this seized document
We are of the view that page no. 7 of BRI-20 is a dumb document and particularly one of the director of the assessee company Shri Subrata Banik was deposed during the course of search on 07.11.2006 but no question about this document was asked, which implies that this page was not considered as important and even after search no questions were asked about the narrations or entries. In view of the above, we confirm the order of CIT(A) and both the issues of revenue's appeal are dismissed.
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2015 (12) TMI 1833
Accrual of income - Accrued interest on loans classified as “Non-performing Assets” - Tribunal deleted the addition - HELD THAT:- As in THE URBAN CO-OPERATIVE BANK LIMITED [2014 (10) TMI 740 - KARNATAKA HIGH COURT] a Division Bench of this Court has answered the substantial questions of law in favour of the Assessee by following the earlier judgment in the case CANFIN HOMES LTD. [2011 (8) TMI 178 - KARNATAKA HIGH COURT]. - Decided against revenue.
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2015 (12) TMI 1832
Exemption u/s 11 - corpus fund received - AO noted that all the seven persons denied having given any donation to the assessee thus addition proposed u/s 68 - HELD THAT:- As held in the case of CIT Vs P.K.Noorjahan [1997 (1) TMI 6 - SUPREME COURT] the addition cannot be made by AO just for the sake of making addition - donation received from the persons who were not called and the persons who were called and accepted the fact of giving donation, cannot be said to be not genuine. As regards the persons who had come and denied before the Assessing Officer the fact of giving donation, we observe that certain fallacies were pointed out by the assessee before the lower authorities, which have not been dealt with by either the Assessing Officer or the learned CIT (Appeals). Further, cross examination of these persons was specifically asked by the assessee, which was not provided to it. In this view, the addition even on these accounts cannot be made.
The addition on account of corpus donation in the present case, even if sustained, would go to increase the income of the assessee. Even if the corpus donation, which is held to be bogus, amounting to ₹ 1 crore, will, at best go to increase the income of the assessee. The receipts will become ₹ 8,16,18,794/- and the application being ₹ 21,51,18,322/-, is in any case more than 85% of the receipts. Therefore, the assessee will get the exemption under section 11 of the Act even on this count. - Decided in favour of assessee.
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2015 (12) TMI 1830
Exemption u/s 10(23G) on the interest income - assessee is a non-banking financial company engaged in advancing loans and making investments - AO denied the exemption on the ground that the assessee has not earned the interest income out of investment activities, but out of business activities and the Ld CIT(A) also confirmed the same - HELD THAT:- Issue decided in favour of assessee as relying on own case [2012 (4) TMI 772 - BOMBAY HIGH COURT]
Loss arising on sale of investment as a business loss - HELD THAT:- We notice that the Ld CIT(A) has allowed the claim in AY 2002-03 [2014 (10) TMI 1018 - ITAT MUMBAI] by considering the business activities of the assessee. Since the AO has accepted the claim of the assessee in a number of years, we are of the view that the AO was not justified in taking different view in this year. Accordingly, we uphold the order of Ld CIT(A) on this issue.
Treatment of leasehold improvements expenditure - revenue or capital expenditure - HELD THAT:- As assessee has incurred the expenditure on lease hold premises and no asset has come into existence. Accordingly he directed the AO to allow the same as revenue expenditure. The Ld A.R submitted that an identical issue was considered by the Tribunal in the assessee’s own case relating to AY 2004-05 [2012 (4) TMI 772 - BOMBAY HIGH COURT] and was decided in favour of the assessee. Consistent with the view taken therein, we uphold the order of Ld CIT(A) on this issue.
Assessment of interest arising on “Non Performing assets” on accrual basis - HELD THAT:- As this issue is covered by the decision rendered by the Tribunal in the assessee’s own case for AY 2004-05 [2012 (4) TMI 772 - BOMBAY HIGH COURT] wherein the Tribunal has decided this issue in favour of the assessee. He further submitted that the decision taken by the Tribunal was in accordance with the decision rendered by the Hon’ble Bombay High Court in the case of CIT Vs. KEC Holdings Limited [2014 (7) TMI 139 - BOMBAY HIGH COURT] Hence, consistent with the view taken by the Tribunal in the assessee’s own case, se set aside the order of Ld CIT(A) on this issue and direct the AO to delete this addition.
Rejection of claim of Bad debts written off relating to the TDS certificate not received by the assessee - HELD THAT:- As decided in INDIAN PRODUCTS TRADING CO. PVT. LTD. VERSUS ITO RG 3 (2) (1) , MUMBAI [2010 (9) TMI 1263 - ITAT MUMBAI] it is stated that the assessee did not receive TDS certificates from the debtor and hence it could not claim credit for the tax deducted at source amount. Accordingly the assessee has written off the TDS amount as irrecoverable, herefore the amount withheld by the debtor has TDS is certainly due to the assessee and when the assessee writes off this debt as irrecoverable, the same is allowable as deduction u/s 36(1)9vii), applying the ratio of the Apex Court in the case of TRF Ltd [2010 (2) TMI 211 - SUPREME COURT]
Disallowance of various expenses - HELD THAT:- we notice that the assessing officer has, in addition to the element of personal expenses, also taken the view that they have been incurred for non-business purposes. Before us also, the assessee has failed to establish the business connection in incurring all these expenses. Accordingly we are of the view that some portion of expenses needs to be disallowed to take care of deficiencies, if any, but the disallowance of 30% appears to be on the higher side. Accordingly, in the case of Business development and entertainment expenses, we sustain an addition of 10% of expenses and modify the order of Ld CIT(A) accordingly. In the case of advertisement and publicity expenses, we sustain the addition of ₹ 1.00 lakh pertaining to the donation made to Doon School and Dutch National daily and 10% of the remaining portion of the expenses listed out in the table given in page 32 of the assessment order. The order of Ld CIT(A) stands modified accordingly.
Disallowance of write off of deposit as irrecoverable - CIT(A) allowed the same by holding that the same is related to the business of the assessee - HELD THAT:- Assessee did not furnish the relevant details to support the said contention. In our view, the decision rendered by the Co-ordinate Bench of the Tribunal in the case of Reliance Engineering Associates Pvt.Ltd [2010 (11) TMI 507 - ITAT, MUMBAI] can be applied only if the assessee proves that the rent deposit was paid in respect of accommodation hired for the staff members. Hence, in the interest of natural justice, we are of the view that the assessee should be provided one more opportunity to prove the same. We shall make it clear that the addition made by the AO shall be sustained, if the assessee fails to prove to the satisfaction of the AO that the concerned accommodation was taken for the residential purposes of staff members of the assessee. The order of ld. CIT(A) on this issue stands modified accordingly.
Disallowance of “out of pocket expenses” incurred in relation to Yes Bank - HELD THAT:- we notice that the assessee failed to file details of expenditures, purpose for which it was incurred, how it was incurred and how it was not recoverable from “Yes Bank” and steps taken for recovery of the same etc., either before the AO or before Ld CIT(A). In our view, the relevant details are necessary in order to decide about the allowability of this expenditure. Accordingly, we modify the order of ld. CIT(A) and restore the same to the file of the AO in order to provide an opportunity to the assessee to furnish relevant details. We shall make it clear that the addition made by the AO shall be sustained, if the assessee fails to furnish the details to the satisfaction of the AO.
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2015 (12) TMI 1829
Depreciation u/s 32 on the said revalued trademark - AO's failure to obtain prior approval of the JCIT - HELD THAT:- We find the CIT (A) in the second round has left so many gaps with regard to the fact of AO‟s failure to obtain prior approval of the JCIT and the consequences of not obtaining such approval on the claim of the assessee.
CIT (A) did not consider the fact whether the provisions of Explanation-3 to section 43(1) of the Act actually apply to the facts of the present case; whether AO merely ignored the claim of depreciation on the revalued cost of the trademark. Further, CIT (A) has also not considered whether there is any substitution of valuation at all when the AO considered the value of the trademark at “zero”.
CIT (A) is directed to pass a speaking order as to how the Explanation-3 to section 43(1) applies to the facts of the present case from all angles if the conditions specified in the said Explantion-3 are fully satisfied or not. He is also directed to pass an order on how the AO is permitted to reject the valuation report furnished by the assessee when the AO does not have any other report on hand from the DVO or otherwise. Further, CIT (A) is also directed to examine the applicability of the cited judgment of the Hon‟ble Gujarat High Court in the case of Ashwin Vanaspati Industries [2002 (1) TMI 40 - GUJARAT HIGH COURT] and others. Further also, CIT (A) should examine the applicability of the 5th proviso to section 32(1) of the Act and give reasons in writing on how the amended provisions apply to the facts of the present case. Thus, we remand the whole of the issue relating to the claim of depreciation on the trademark to the file of the CIT (A) for third round of the proceedings before him. Accordingly, all the issues raised in the original grounds as well as additional grounds are allowed for statistical purposes.
Quantification of allowable depreciation u/s 32 - The same is dependent on the WDV of the asset, therefore, Block of Asset. If the value of the asset varies in the year of acquisition and in amount, the consequence shall be there in all the subsequent years. It is an admitted fact that the issue raised in the allowability of depreciation is always with reference to the WDV of the trademark at the end of each of the AY. Accordingly, considering the commonality of the issues involved in all the 9 appeals with that of the one adjudicated by us in the above paragraphs of this order (appeal for the AY 19992000), our decision given therein squarely applies to the present 9 appeals too. Accordingly, all the grounds as well as the additional grounds raised in all the 9 appeals are allowed for statistical purposes.
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2015 (12) TMI 1828
Allowability of commission payment - non-discharge the burden of proving that the expenditure laid out were incurred wholly and exclusively for the purpose of business - HELD THAT:- Undisputedly, the assessee company had paid commission through account payee cheque. This will not debar the AO from probing the matter further to examine whether the commission payments are allowable expenditure or not. In this context, it is worth quoting that the decision of the Hon’ble Supreme Court in the case of Laxmi Narayan Madanlal Vs CIT [1972 (9) TMI 4 - SUPREME COURT].
AO is empowered to probe further and reach at a conclusion whether the commission was paid for the services actually rendered and determine whether the expenditure was laid out wholly and exclusively for the purpose of business. In the present case, the AO had called upon the assessee company to furnish evidence in support of the services rendered by the commission agents. In response to this, except highlighting the role of commission agent, no evidence was furnished in support of the services rendered by the commission agent. The AO gave categorical finding that the assessee had failed to substantiate the actual services rendered by the sales agent.
Assessee company had chosen not to file any evidence in support of the services rendered by sales agencies either before the learned CIT(A)or before us. Even before us, the learned AR miserably failed to demonstrate before us as to what kind of proof was filed before the lower authorities in support of services rendered by the commission agent. Pursuant to the direction of the Bench to file evidence in support of the services rendered the assessee had chosen to file only correspondence relating to the payment which no way establishes the actual services rendered by the commission agent. Thus, the assessee failed to discharge the burden of proving that the expenditure laid out were incurred wholly and exclusively for the purpose of business.
CIT(A) had not examined any evidence to show that the agents have actually rendered their services. The learned CIT(A) had totally misdirected himself by examining the issue from the angle of tax deducted at source and he had failed to examine whether the services are actually rendered by the commission agents or not. Therefore, we are unable to sustain the order of the learned CIT(A) and hold that the commission payments in question are not allowable. The assessee company had miserably failed to demonstrate the actual services rendered by the agents to whom the commission payments were made, despite ample opportunity granted by this Tribunal to furnish evidence in support of service rendered by commission agent. - Decided against assessee.
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2015 (12) TMI 1827
Arms length price of International transaction - corporate services charge paid - HELD THAT:- Disallowance on account of corporate services was made for the same reason as in the impugned assessment year. Since this issue has already been adjudicated upon by the Hon'ble Tribunal in the preceding year, respectfully following the same in the impugned assessment year also, we remit the matter back to the file of the AO and direct him to compute the ALP of the corporate services charge paid by reducing 50% of the benefit if any received by the assessee from the financial services received. The AO is directed to examine the amount of benefit as calculated by the assessee and thereafter decide the issue as per the direction given.
Disallowance of commission expenses - Rate of commission paid by the assessee - HELD THAT:- Rate of commission paid for the transaction cannot be interfered by the Assessing Officer as it is the understanding between the parties at the relevant time which determines the rate of commission to be paid on a particular transaction. In view thereof, we reverse the order of Assessing Officer in restricting the rate of commission to 3% . In any case, the said restriction was made by the Assessing Officer observing that the rate of commission paid by the assessee was 6.6% whereas the assessee claims that it had paid commission @ 4.48%. The other two parties to whom commission had been paid by the assessee and the same has been restricted by the Assessing Officer are M/s Integrated Technology and M/s Aakaar Engineering & Manufacturing Co. The commission to the said parties, as alleged by the Assessing Officer are paid @ 6.90% and 6.76% respectively. In line with our observations herein above, we find no merit in the disallowance made by the Assessing Officer restricting to rate of commission to 3% as against the rates agreed upon between the parties.
Disallowance u/s 14A - HELD THAT:- Admittedly the investment was made in the year 1996 and though the assessee may have received interest and dividend at one stage but for the last over a decade M/s HMGV is before BIFR and has not been paying any interest to the assessee. The investment as is apparent from the facts was made as a business expediency to procure raw material manufactured by M/s Hindustan Max GB Ltd. The Income Tax Appellate Tribunal, therefore, rightly deleted the addition made by the assessing officer, under Section 14A of the Act.
Since the disallowance made u/d 14A has been deleted nothing remains for making adjustment to the Book Profits u/s 115JB in respect of Section 14A. Therefore adjustment made to the Book Profit on account of disallowance u/s 14A is also deleted.
Interest expenses allowability - Non allowance of depreciation on the amount treated as capital expenditure - HELD THAT:- Indirect expenses would constitute revenue expenditure only and would not become capital merely for the reason that such expansion was termed as new project. Therefore we hold that the treatment given by AO to the sum as capital is not in accordance with law and is hereby reversed.
Disallowance of interest expenses on account of capital expansion - HELD THAT:- If no particular loan has been taken for the asset which has been shown under the head 'capital work in progress' then disallowance could not have been made. However, each loan and its utilization requires fresh examination, therefore, we remand this issue to the file of Assessing Officer with a direction to ascertain details of various loans and how they were fully utilized and then only decide the issue in accordance with law. Respectfully following the same we hold that no disallowance u/s 36(1)(iii) can be made if no loan has been taken for investment in capital work in progress, and further for the verification of this fact, we remit the matter back to the file of the AO with a direction to ascertain the utilization of various loans taken by the assessee and thereafter decide the issue in accordance with law.
Deduction u/s 43B r.w.s. 36(1)(ii) - HELD THAT:- We hold that ex-gratia payment pertaining to the impugned year only is allowable as business expenditure and since this aspect has not been examined by the AO, we set aside the order and remand the matter back to the file of the A.O. for re-examination in terms of the direction contained in para-43 of the order of Tribunal for A.Y. 2009-10.
Disallowance of Royalty expenses incurred by the assessee for the manufacture of its product Purimox - HELD THAT:- We hold that the expenditure incurred by the assessee for the payment of Royalty is allowable and we further hold that the depreciation allowed thereon be withdrawn. We therefore, set aside the order of the AO and delete the addition made.
Disallowance of expenditure - assessee had failed to produce relevant bills and vouchers during the course of assessment proceedings - HELD THAT:- Claim of the assessee that it has not claimed any deduction in respect of impugned prior period expenses, has not been examined by AO or by DRP, despite the fact that specific argument was raised to this effect and books of accounts produced before the AO. Therefore, the AO is directed to verify this fact and if it is found that such amount has not been claimed as deduction during the year no disallowance can be made in respect of such non-claimed deduction. In case any such amount is claimed as deduction, plea of the assessee that liability in respect of such expenses has capitalized in the year under appeal should also be examined as assessing officer has not dealt with this argument of the assessee though specifically raised. AO shall give opportunity of hearing to the assessee and decide the allowability of deduction in accordance with law and in the light of above mentioned direction.
As regards the other component of disallowance on account of non-production of supporting documents, it is seen that AO did not give adequate opportunity to the assessee and when evidences were filed before DRP, DRP without assigning any reason, brushed aside the same which in our considered opinion is not justified. Therefore this issue is sent back to the file of AO to decide it after giving reasonable opportunity of being heard to the assessee.
Disallowance of expenditure - assessee failed to file satisfactory reply and the said bills pertained to either earlier year or were unsupported with voucher - HELD THAT:- Certain expenses have also been disallowed for the reason that the invoice amount does not tally with the supporting voucher. Ld. AR submitted that this issue was clarified to the A.O. wherein it was explained that in certain cases a single purchase order is made for materials /products / items required by different departments of the assessee and in pursuance to which the material is supplied by the vendor raising a single bill, sometimes without mentioning the PO reference no. The SAP system of the assessee, thereafter, posts the purchases in the respective ledger accounts wherein the purchases accounted for do not tally with the consolidated figure mentioned in the purchase order. Ld. AR stated that relevant purchase order and invoices were also placed before the A.O.
Despite the submissions and evidences placed by the assessee before the assessing officer, the same has neither been considered nor examined by him. Moreover we find that the DRP also failed to consider the submission of the assessee. In view of the same we find no justification in the order of the A.O. making the disallowance without appreciating the submissions made by the assessee and the evidences filed by it. But in the interest of justice we remit the matter back to the file of the A.O. to examine the issue afresh in the light of submissions and evidences placed by the assessee and thereafter adjudicate thereon in accordance with law. The assessing officer is directed to give adequate opportunity of hearing to the assessee in respect of the above issues.
Depreciation on certain civil construction expenses under the head Plant & Machinery - HELD THAT:- Referring detailed explanation of the assessee that the civil work undertaken pertained to building reinforced foundation for the purpose of installing new plant and machinery has not been rebutted much less with the help of any cogent basis. Therefore such reinforcement even to civil construction would be treated as installation cost of Plant and Machinery and would qualify for depreciation as Plant and Machinery. In view of the same, we allow depreciation on civil construction work in the facts of the present case as applicable to Plant and Machinery.
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2015 (12) TMI 1825
Unutilised modvat credit - HELD THAT:- As decided in own case [2015 (11) TMI 1799 - ITAT MUMBAI] the assessee had, in valuing their stock, uniformly adopted the “net method”, viz. , valuing the raw materials at the purchase price minus the Modvat credit. This method was also adopted while valuing the unconsumed raw materials and the work in progress at the end of the year. The Assessing Officer took the view that the Modvat credit should be treated as an income or advantage in the nature of income and added back the Modvat credit. The Appellate Tribunal held that the Modvat credit could not be added back to the income of the assessee, that merely because the Modvat credit was an irreversible credit available to manufacturers upon purchase of dutypaid raw material, that would not amount to income which was liable to be taxed under the Act : income was not generated to the extent of the Modvat credit on unconsumed raw material ;(ii) that it was not permissible for the Assessing Officer to adopt the “gross method” for valuation of raw materials at the time of purchase and the “net method” for valuation of stock on hand.
Addition made on account of catalyst - revenue or capital expenditure - AR's submission that the capitalization was done by the assessee only because of the prescription of the ICAI with regard to the change of the accounting standard - HELD THAT:- The objection by the revenue that the assessee should have claimed it in the earlier years, or the basis for claiming this during the year under consideration is because the assessee started making profit for the first time after amalgamation etc. , is not sustainable. Even the assessee's counsel submitted before us that this was not the first year of profit making. Even before the amalgamation the company made the profit. It is true that after amalgamation also the assessee had positive income. We have to accept the assessee's contention that it was not the motive to reduce tax, but it was because of the change in the method accounting standard prescribed by the ICAI is a reason to be accepted in the absence of any evidence to the contrary.
Disallowanceu/s. 14A - HELD THAT:- While deciding the appeal for the AY. 2007-08 we have restored back the issue of disallowance to be made u/s. 14A to the file of the AO. Following the same, AO is directed to decide the issue afresh after affording a reasonable opportunity of hearing to the assessee. Additional Ground No. 1 and 2 also deal with the disallowance made u/s. 14A of the Act. Following out order for AY07-08 we are remitting back the issue to the file of AO
Disallowance u/s. 40(a)(ia) towards provisions made for expenses at the year end - HELD THAT:- We find that the AO had invoked the provisions of section 40(a)(ia), though he has also discussed the principles of contingent liability, while making the disallowance. We find that FAA has passed a nonspeaking order and just endorsed the views of the AO but he was also of the opinion that provisions of section 40(a)(ia) were applicable. It is found that assessee had specifically mentioned during the assessment proceedings, that it had not received the bills under various heads, that provisions of tax deducting at source were not applicable for the provisions made. We find that similar issue had arisen in the case of Mahindra & Mahindra Ltd. [2013 (9) TMI 522 - ITAT, MUMBAI] . In that matter it was held that TDS provisions were not applicable for the provisions made at the year end.
Disallowance u/s. 43B(f), being provision made for leave salary - HELD THAT:- As decided in own case[ 2014 (10) TMI 154 - ITAT MUMBAI] as it has been decided in assessee’s own case for the earlier assessment year, following the decision in Srikakollu Subba Rao And Co. And Others Versus Union Of India And Others [1988 (3) TMI 46 - ANDHRA PRADESH HIGH COURT] in order to apply the provisions of Sec. 43B not only should be the liability to pay the tax or duty be incurred in the accounting year but also should be statutorily payable in the accounting year - the provision for leave salary is not a statutory liability but only a contractual liability which is payable only if the employees resigns or retired from the services – Decided in favour of assessee.
Disallowance of Employee Stock Option Scheme(ESOP) - HELD THAT:- We find that the Special Bench of the Tribunal in the case of Biocon Limited [2013 (8) TMI 629 - ITAT BANGALORE] has decided the issue of ESPO in favour of the assessee.
Disallowance of depreciation on goodwill on acquisition of Madura garments Division - HELD THAT:- As decided in own case [2013 (11) TMI 1241 - ITAT MUMBAI] we direct the AO to allow the claim of depreciation on Goodwill.
Sale of certified emission reduction (CER) - revenue or capital receipt - HELD THAT:- Tribunal has factually found that "carbon credit is not an offshoot of business but an offshoot of environmental concerns. No asset is generated in the course of business but it is generated due to environmental concerns". We agree with this factual analysis as the assessee is carrying on the business of power generation. The carbon credit is not even directly linked with power generation. On the sale of excess carbon credits the income was received and hence as correctly held by the Tribunal it is capital receipt and it cannot be business receipt or income.
Treatment of interest subsidy under TUFS - HELD THAT:- We find that, while deciding the appeal for 95-96 the Tribunal had dealt with the sales tax/Vat subsidy. It had no occasion to deal with the interest subsidy received under the TUFS. We find that neither the AO nor the FAA had any occasion to decide the nature of the interest subsidy of TUFS while passing the assessment order or deciding the appeal for the year under consideration. We are of the opinion that in the interest of justice the matter should be restored back to the File of FAA for fresh adjudication
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2015 (12) TMI 1824
TP Adjustment - comparable selection - admission of additional grounds - HELD THAT:- By virtue of Special Bench decision in the case of M/s Quark Systems Pvt. Ltd [2009 (10) TMI 591 - ITAT, CHANDIGARH] , assessee can raise additional grounds seeking exclusion of comparables selected by it or not objected by it before the lower authorities. However, the Hon’ble Punjab & Haryana High Court [2011 (5) TMI 508 - PUNJAB AND HARYANA HIGH COURT] had upheld the Special Bench decision in the case of M/s Quark Systems Pvt. Ltd. ( Supra) specifically noting that the Special Bench had remitted the issue of comparability of such companies to the AO/TPO for verification afresh. Hence, we are admitting the additional grounds. Hence the additional grounds are set aside to the file of the Assessing Officer.
Comparables selecton - Companies functionally dissimilar with that of assessee as engaged in providing software design, development and maintenance services and marketing support services to its associated enterprises (AEs) as a captive service provider need to be deselected from final list.
Companies having turnover exceeding ₹ 200 crores is to be excluded from the final list of comparables selected by the TPO in the light of decision of the coordinate Bench of this Tribunal in the case of Cypress Semiconductor India P. Ltd [2015 (4) TMI 373 - ITAT BANGALORE]
Companies with related party transactions exceeding 15% be excluded from the list of comparables chosen by the TPO.
Inclusion of reimbursement of expenses in the operating cost as well as operating revenue of the assessee company - HELD THAT:- We find that the assessee company has received reimbursement of these expenses as cost from its AE and consequently the amount received/receivable is deemed to be at arm’s length price. Hence this ground of appeal is allowed.
Working capital adjustment - HELD THAT:- Advances received from AEs should be considered as a part of trade payables in the computation of working capital adjustment. Hence, the TPO/AO is directed to consider advances from ARM Ltd. UK and ARM Inc., USA in the computation of working capital adjustment and rework the same. This ground is allowed for statistical purposes.
Recomputation of deduction u/s. 10A - HELD THAT:- Whatever is excluded from the export turnover, has also to be excluded from the total turnover. Accordingly, we direct the AO to recompute the deduction u/s. 10A in respect of travel expenses and telecommunication charges by reducing the same from total turnover also. See TATA ELXSI LTD. [2011 (8) TMI 782 - KARNATAKA HIGH COURT]
Non-grant of refund and corresponding interest u/s. 234D - assessee submitted that according to the AO, refund of ₹ 7,04,700 has been issued to the assessee, but the assessee has not received the refund. Consequently, the AO has erred in charged u/s. 234D of the Act of ₹ 81,041 on the said refund of ₹ 7,04,700 - HELD THAT:- We set aside this issue to the file of Assessing Officer to verify the claim of assessee and decide the issue afresh.
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2015 (12) TMI 1821
Penalty u/s 271AAA - present assessee covered u/s 132 OR 133A - HELD THAT:- There is no dispute on the fact that the assessee offered the disclosed income and paid taxes. That issue on quantum reached the finality. When comes to the penalty proceedings, the AO erroneously initiated the penalty proceedings u/s 271AAA of the Act when the present assessee is not covered u/s 132 of the Act. He is covered only u/s 133A of the Act. Section 271AAA is not relevant for initiating such proceedings legally. Further, on perusal of the order of the CIT (A), we find paras 6.1 to 6.3 are relevant in this regard.
CIT (A) has rightly adjudicated the issue as per the provisions of the Act and in accordance with law. Therefore, in our view, the decision taken by the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, grounds raised by the Revenue are dismissed.
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2015 (12) TMI 1820
Penalty u/s 271B - violation of section 44AB - HELD THAT:- We find that the findings recorded by the learned CIT(A) are not correct as assessee has been demanding the release of documents from 12.08.2009 onwards, which were provided to the assessee only on 14.07.2010, therefore, the delay in getting accounts audited was beyond the control of assessee. We further find that the penalty for violation of section 44AB is not mandatory. See SS BANGA. [2005 (1) TMI 82 - PUNJAB AND HARYANA HIGH COURT]
In the present case, we find that the reason for late filing of audit report was beyond the control of assessee, and therefore, there is a reasonable cause and therefore, penalty was not imposable. - Decided in favour of assessee.
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