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Income Tax - Case Laws
Showing 41 to 60 of 533 Records
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2017 (7) TMI 1375 - ITAT CHENNAI
Rectification u/s 154 - seeking to assess the book profit of the assessee at the ‘correct’ figure - HELD THAT:- Only thing that needs to be seen in this regard is if the company, in reducing the profit on the sale of shares, has followed any of the specified adjustments under Explanation 1 to s. 115JB. We find that none of the specified adjustments correspond to the said adjustment, made by the assessee to the net profit per the revised return, and neither has the assessee stated any at any stage. This, rather, raises a question on the validity of the said revision, which u/s. 139(5) could only be rectify an omission or wrong statement in the original return, so that it is incumbent on the assessee to state what omission or wrong statement informs its revision, i.e., its’ basis, and which it has abysmally failed to.
Continuing further, capital gains on transactions in securities has been specified for reduction (from net profit) only in the case of a foreign company (Cl. (iid) to Explanation 1, inserted w.e.f. 01/4/2016). The same by itself implies, i.e., if there were to be any doubt whatsoever in the matter, that the capital gains for an assessee, not being a foreign company, being not specifically provided, is not to be reduced (from the net profit) in arriving at the book profit. Thus, even if the shares sold are held as a capital asset – which does not appear to be the case on the basis of the assessment order, so that the surplus on their sale is a capital gain to the assessee, the profit on the said sale cannot be reduced.
We accordingly have no hesitation in confirming the impugned order and, thereby, the rectification by the AO.
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2017 (7) TMI 1373 - SC ORDER
Cancelling the block assessment framed u/s. 158BC r.w.s 158BD - satisfaction note in the case of assessee (other than searched person) was belated and after the assessment was completed - satisfaction note can be after the assessment is completed in the case of searched person - HELD THAT:- SLP dismissed.
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2017 (7) TMI 1372 - BOMBAY HIGH COURT
Allowing exgratia payment as a deductible expense - exgratia payment by its very nature of payment is a favour having no nexus with commercial consideratio - Tribunal allowed claim - HELD THAT:- Section 63 of the Act empowers the Board of Directors to approve payment of exgratia amount to its employees. It is also observed by the Tribunal that the assessee has been extending incentives to employees for the preceding years and the subsequent years also and the same is accepted by the Revenue.
Tribunal has also relied on the Judgment of this Court in the cases of CIT Vs. Maina Ore Transport P. Ltd., [2008 (8) TMI 504 - BOMBAY HIGH COURT] and Shahzada Nand & Sons [1977 (4) TMI 4 - SUPREME COURT]wherein it has been held that exgratia payment made by the employer to its employees is on account of commercial expediency and hence allowable.
In the case of Mafatlal Fine Spg. & Mfg. Co.Ltd [2003 (2) TMI 27 - BOMBAY HIGH COURT] relied by the Revenue, there was no evidence to show the agreement between the assessee and the employees and the earning of the assessee or to show that exgratia payment is reasonable or in accordance with the provisions at the relevant time.The practice of exgratia payment is evident from the observations of the Tribunal. For the preceding year and the subsequent years the department has allowed deduction in respect of exgratia payment. No substantial question of law
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2017 (7) TMI 1371 - ITAT MUMBAI
Correct head of income - License Fees receipt - 'Profits and Gains of Business or Profession' or "Income from House Property" - HELD THAT:- When it remains as a matter of fact that the income from the composite letting of the furnished flats by the assessee, had after thorough vetting and scrutinizing consistently accepted and assessed as 'business income' by the department in the earlier years while framing regular assessments, therefore, in the absence of any new facts emerging during the year under consideration, which could irrefutably dislodge the aforesaid view and therein justify a view to the contrary, such an inconsistent approach on the part of the A.O would not be permissible.
Reliance placed by the department on the judgment of H.A. Shah and Co. v. CIT [1955 (9) TMI 53 - BOMBAY HIGH COURT] is distinguishable on facts whrein upheld the view arrived at by the A.O, for the reason that during the year under consideration certain documents justifying taking of such contrary view were made available on record - unlike the facts involved in the case before the Hon'ble High Court, now when in the case of the present assessee no such material had therein emerged which could go to justify taking of an inconsistent view by the A.O, therefore, the income received by the assessee from composite letting of furnished flats on the basis of same facts as were there before him in the preceding years, cannot be permitted to be assessed during the year under the head 'Income from house property'.
Except for raising of oral averments, no material had been brought to our notice by the ld. D.R which could persuade us to subscribe to the claim of the department that certain new facts had emerged during the year under consideration, which clearly militated against the validity and legality of assessing of the composite rental receipts under the head 'business income' in the preceding years, and would thus justify a departure from the consistent approach that had been adopted by the department at stretch for years. We thus in the backdrop of our aforesaid observations, thus set aside the order of the CIT(A) and therein hold that the composite rental receipts were liable to be assessed, as claimed by the assessee in her return of income, as her 'business income'. The Ground of appeal No. I is allowed.
Depreciation Disallowance on fully furnished flats - Whether once the flats are used for the purposes of the business of composite letting, they form part of the block of assets and in view of Explanation 5 to section 32, allowance of depreciation is mandatory and hence cannot be disallowed? - HELD THAT:- Composite rental receipts are liable to be assessed as the 'business income' of the assessee, therefore the assailing of the disallowance of depreciation by the assessee is rendered as consequential. We thus direct the A.O to allow the claim of the assessee towards claim of depreciation. The Ground of appeal No. II being consequential to our adjudication of the head of income under which the composite letting receipts were liable to be assessed, is thus allowed.
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2017 (7) TMI 1367 - ITAT CHANDIGARH
Exemption u/s 11 - assessee as covered by section 2(15) or not - AO observed that the appellant was carrying on business of sale & purchase of residential houses, construction of mutli-storeyed houses, sale of residential plots and commercial plots by auction and earned huge net profit - HELD THAT:- Considering the nature of the Act, selling of plots and premises by the trust is only incidental and ancillary to its main purpose which at the cost of repetition is "town improvement". Even where the plots are developed and premises are constructed and sold at the market price, the activity is not commercial or business venture per se but one necessitated on account of the implementation of the provisions of the trust through statutory schemes. The main purpose of such schemes is driven by public requirements and not as a commercial venture per se. They are incidental to the main object of the trust.
In the present case, the AO has not indicated any facts which indicate that the assessee deviated from this principle. He has merely referred the extent of profit making activities without correlating the same to the other activities of the trust.
As decided in Tribune Trust [2017 (1) TMI 53 - PUNJAB AND HARYANA HIGH COURT] Section 2(15) and the corresponding sections including Sections 11, 12, 12A and 12AA are independent of Section 10(20A) of the Act. Upon the omission of Section 10(20A), the provisions of the other sections were not affected. They remained intact. An assessee could have been entitled to the provisions of Section 10(20A) and the other provisions simultaneously. The omission of one, however, does not affect the validity or the existence of the others. The two provisions are distinct and independent of each other. Thus the omission of Section 10(20A) did not affect the rights of the parties claiming the benefit of Sections 2(15), 11, 12, 12A and 12AA - Decided in favour of assessee.
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2017 (7) TMI 1365 - ITAT MUMBAI
Addition u/s 14A - Contention of the assessee that it has not incurred any specific expenditure to earn exempt income, but made adhoc disallowance towards administrative and other expenses - assessee further contended that the AO cannot invoke the provisions of section 14A unless specifically pointed out how the disallowance computed by the assessee is incorrect - HELD THAT:- No merit in the argument of the assessee for the reason that once the AO invoked the provisions of section 14A to compute disallowance of expenditure incurred to earn exempt income, it is a justifiable compliance of said provision, and he need not to record separate satisfaction.
In this case, the AO has applied the provisions provided u/r 8D and worked out the disallowance as against adhoc disallowance made by the assessee, which is supported by the decision of jurisdictional High Court in the case of Godrej Boyce Mfg Co Ltd [2010 (8) TMI 77 - BOMBAY HIGH COURT] wherein it has been held that disallowance u/s 14A has to be computed as per the provisions provided u/r8D with effect from AY 2008-09 onwards. Therefore, we are of the view that the AO has rightly computed disallowance towards expenditure u/s 14A
Validity of adjustments made under clause (f) to section 115JB towards disallowance made u/s 14A r.w.r. 8D - additional ground raised by the assessee - HELD THAT:- We find merits in the arguments of the assessee for the reason that in the case of ACIT vs Vireet Investments Pvt Ltd [2017 (6) TMI 1124 - ITAT DELHI] has considered similar issue and after considering the provisions of section 115JB(2) observed that computation of book profit in terms of clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to computation as contemplated u/s 14A r.w.r.8D. Therefore, considering the facts of the case and also following the decision of ITAT, Delhi Special Bench, we are of the view that no adjustments can be made towards book profit computed u/s 115JB on account of disallowance made u/s 14A for the purpose of computation of book profit u/s 115JB of Income-tax Act, 1961. Appeal filed by the assessee is partly allowed.
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2017 (7) TMI 1363 - ITAT CHENNAI
Bonus redemption expenses addition - liability incurred by the assessee was in the nature of contingent liability and fully dependent upon the uncertain future visit and option of the customers and is not a know liability - CIT deleted the addition - HELD THAT:- As decided in own case [2017 (8) TMI 361 - ITAT CHENNAI] we do not find any merit, the assessee has provided the liability as soon as the first customer made first purchase, 1% of the first purchase value and liability to give discount to the customer accrued as soon as the first purchase was made. The only passing of discount to the customers is only at second purchase. The assessee is legally bound to pass the reward or discount to the customer as soon as the first purchase was made and if the customer does not make claim for such a discount, the accrual liability not stopped, the assessee is bound to honour its claim. Being so, the quantification of such liability is already determined. There is no dispute regarding quantification of such liability. Case of Bharat Earth Movers Vs. CIT [2000 (8) TMI 4 - SUPREME COURT] is directly applicable to the facts of the present case. Accordingly, we have no hesitation in confirming the order of the CIT(Appeals) on this issue. Hence, this ground of Revenue stands dismissed.
Addition towards valuation of closing stock - HELD THAT:- As decided in own case [2017 (8) TMI 361 - ITAT CHENNAI] assessee has valued the unsold stock by discounting purchase price at fixed percentage considering the age of the stock. However, this method of reduction is not following year by year - There is no explanation for such kind of arbitrary reduction of either 25% or 50%. There is no consistency in the method followed by the assessee for valuing the closing stock. The closing stock is to be valued at market price or cost whichever is less and that should be consistent from year to year - assessee is not disputed that it has been followed the same method. Consequent to search action, the assessee wanted to change the method of stock valuation for the first time, which is nothing but an afterthought so as to reduce the income which cannot be permitted at this point of time. - Decided against assessee.
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2017 (7) TMI 1362 - ITAT KOLKATA
Addition on account of grant to sports and recreation - Difference in crediting in P&L account under the head sale of scrap and plant machinery - HELD THAT:- The assessee is a Government of India Undertaking and is a 100% subsidiary of Coal India Ltd. It is engaged in the business of coal mining. Tribunal in assessee’s own case for AYs 2003-04 to 2005-06 it cannot be said that the grants given by the Assessee are not for the purpose of business of the Assessee. As an employer provision of grants to provide better conditions of service will be part of the labour cost of the Assessee and it has to be allowed as deduction.
As far as the plea of the revenue that the evidence of areawise expenses were not produced, the plea of the Assessee was that the coal area is scattered over a large area and that the Assessee being a Government of India Undertaking, its accounts are subject to review by CAG and no adverse comments have been made by the CAG. This plea was enough to disregard the findings of the AO. Taking into consideration the overall facts and circumstances of the case, we are of the view that the deduction claimed had to be allowed - Decided in favour of the assessee.
Addition of environment expenses - HELD THAT:- As decided in own case AY 2003-04 to 2005-06 payment relates to afforestation/tree plantation & Land reclamation and Payment of statutory duty for environment clearance like Water cess & consent fees to Pollution Control Board etc. As rightly contended by the learned AR such payments cannot be disputed on the ground that there was want of proper vouchers. But for payment of these statutory dues the Assessee could not have carried on its business. In the given circumstances of the case, we are of the view that the deduction in question ought to be allowed. We direct the same to be allowed as deduction.
Addition on account of hire charges of bus and ambulance - HELD THAT:- Since the Tribunal has set aside the order or the Ld. CIT(A) and remanded the question of incurring these expenses to the AO for fresh consideration with the liberty to assessee to adduce evidence to substantiate its claim for deduction of the aforesaid expenditure, we also set aside the order of the Ld. CIT(A) and remand the matter back to the file of AO to be decided afresh as ordered in AY 2003-04 to 2005-06. This ground of appeal of revenue is allowed for statistical purposes.
Addition on account of ‘Cess Equalisation Reserve’ under the head ‘current liability’ - AO has treated the amount shown as advance and deposit from customers as fictitious and made the addition - HELD THAT:- As decided in own case comments of the statutory auditor are only with regard to absence of partywise details and in the event of the liability of the Assessee not existing, the same should be treated as income. The conclusion of the revenue authorities that the liability in question is fictitious based on the audit report is therefore incorrect. On the question whether the liability of the Assessee ceased to exist or not and the provisions of Sec.41 (l) of the Act are attracted or not, we are of the view that the Assessee continues to show the liability in question as existing. There is no evidence brought on record to show that the Assessee's liability has ceased to exist. In such circumstances, we are of the view that the impugned addition deserves to be deleted.
Addition on account of donation made to school and club - CIT-A allowed the claim - HELD THAT:- In the light of the aforesaid agreement between the assessee and the National Coal Wage Agreement entered into with the employees’ Union and as such the said agreement was enforceable under the law both the Indian Contract Act as well as under the Industrial Disputes Act, respectfully following the decision in South Eastern Coal Field Ltd. Vs. JCIT [2002 (2) TMI 344 - ITAT NAGPUR] confirm the decision of the Ld. CIT(A) and dismiss this ground of appeal of the revenue.
TDS u/s 194A - Disallowance u/s. 40(a)(ia) - interest given to Coal India Ltd. - HELD THAT:- Order of AO per se is fragile for violation of natural justice because the assessee was not put on notice as to this disallowance made against it. CIT(A) has taken note of section 194A(3)(iii)(f) read with Notification No. S03489 dated 22.10.1970 and that a company is not required to deduct tax at source from payment of interest to another company in which all the shares are held (whether singly or taken together) by Government or the Reserve Bank of India or a corporation owned by that Bank. Since all shares in Coal India Ltd. are held by Government of India at the relevant assessment year before 10% disinvestment of paid up equity capital as per Press Release dated 15.06.2010. In view of prescribed provisions, no tax was required to be deducted at source by the assessee and, therefore, disallowance u/s. 40(a)(ia) of the Act was not warranted and, therefore, action of the Ld. CIT(A) is upheld and this ground of appeal of revenue is dismissed.
CIT(A) not admitting and adjudicating the additional grounds - claim of the assessee for deduction - mistake has taken place at the stage of filing of return of income - HELD THAT:- In S. R. Koshti Vs. CIT [2004 (12) TMI 62 - GUJARAT HIGH COURT] held, inter alia, that authorities under the Act are under an obligation to act in accordance with law - tax can be collected only as provided under the Act and that if an assessee, under a mistake, misconception or on not being properly instructed, is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected. In the light of the aforesaid decisions of the Constitutional courts, we are inclined to admit the additional ground raised before us and remit the matter back to the file of the Ld. CIT(A) to decide in accordance to law afresh the additional grounds which stands admitted after giving opportunity of being heard to the assessee.
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2017 (7) TMI 1361 - ITAT CHENNAI
Disallowance u/s. 14A - HELD THAT:- Assessee has enclosed as a part of his paper-book details of term loans and cash credit accounts, on which the bulk of the interest, disallowed proportionately u/s. 14A, is paid. Where the same has been applied for the stated purpose, i.e., as per the agreement, for financing the capital and the working capital assets of the business, the same stands utilized for business purposes and, accordingly, no disallowance u/s. 14A, i.e., to any extent, could arise. That is, in the absence of the AO credibly rebutting the same. The onus to substantiate its claims though would be on the assessee. The matter is, accordingly, restored to the file of the AO to adjudicate afresh in accordance with law.
Deemed dividend u/s. 2(22)(e) - HELD THAT:- There is a substantial increase in the volume of the credit, the entire of which (₹ 31.26 cr.) is being claimed as in relation to the trade, and it is this claim which in effect is to be substantiated. We have already noted the AO's doubt in the matter, considering the out go of the assessee’s funds toward investment, so that the two facts/incidents are apparently corroborative. Equally relevant is the quantum increase in the credit, so that whether the same corresponds with the increase in trade may be relevant.
The matter arising for determination is factual, i.e., given the law as explained, being the extent to which the transactions of inflow and outflow of funds represent moneys received or paid in discharge of or toward commercial transactions. Clearly, the entire opening credit (₹ 318.38 lacs) shall have to be regarded as a trade credit as no part of it has been regarded as loan or advance in the preceding year. The matter is accordingly restored back to the file of the AO for casting the account, retaining its chronological order, into moneys flows and commercial transactions, and considering the same along with the assessee’s explanation, for his factual findings in the matter per a speaking order and decision in accordance with the law. No restraint is placed, we may clarify, on either side by us inasmuch as the issue is essentially factual so that all relevant material/objection could be taken into account. Appeals by the assessee and the Revenue are partly allowed.
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2017 (7) TMI 1359 - RAJASTHAN HIGH COURT
Income from other source - assessee capitalized the interest income received from the FDRs there by reducing the cost of fixed assets - HELD THAT:- Issue is covered by the decision of this court in [2017 (7) TMI 1206 - RAJASTHAN HIGH COURT] wherein it has been held as if a person borrows money for business purpose but utilises that money to earn interest, however temporarily, the interest so generated will be his income. This income can be utilised by the assessee whichever way he likes. He may or may not discharge his liability to pay interest with this income.
Merely because it was utilised to repay the interest on the loan taken by the assessee, it did not cease to be his income. The interest earned by the assessee could have been used for many other purposes. If the assessee purchased a house or distributed dividend or paid salary of its employees with the money received as interest, will the interest amount be treated as not his income ? This is not a case of diversion of income by overriding title. The assessee was entirely at liberty to deal with the interest amount as he liked. The application of the income for payment of interest could not affect its taxability in any way.” - Decided against revenue.
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2017 (7) TMI 1355 - BOMBAY HIGH COURT
Exemption u/s 54E - Whether Tribunal was right in law in holding that the assessee is entitled to deduction u/s 54E in respect of the capital gain arising on the transfer of a capital asset on which depreciation has been allowed and which is deemed as short-term capital gain u/s 50 - HELD THAT:- Tribunal in [2014 (6) TMI 1043 - ITAT MUMBAI] has relied upon the judgment of this court in case of CIT vs. ACE Builders Pvt. Ltd. [2005 (3) TMI 36 - BOMBAY HIGH COURT]. The said judgment has been approved by the Apex Court in the case of CIT, Panji vs. V.S.Dempo Company Ltd. [2016 (10) TMI 62 - SUPREME COURT]. As the issue raised in the present appeal is already covered by the above referred judgment, no substantial question of law arises.
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2017 (7) TMI 1351 - ITAT CHENNAI
Correct head of income - franchise fees charged by the appellant - income from house property or business income - HELD THAT:- As decided in the Judgment of this Court in the case of "Tamil Nadu Toursim Development Corporation Ltd., Vs. Deputy Commissioner of Income Tax" reported in [2014 (9) TMI 431 - MADRAS HIGH COURT] . Hence, in view of the above, the appeals are liable to be dismissed. The questions of law framed are answered against the appellant - Appeals filed by the assessee are dismissed.
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2017 (7) TMI 1349 - ITAT DELHI
Gain arising due to foreign exchange fluctuation - receivables from A.E. on account of export/rendering of services - whether revenue earned by the assessee from the activity of rendering services to the A.E. and cannot be excluded from the revenue for the purpose of computing margins of the assessee while comparing the same with the comparables - HELD THAT:- We concur with the earlier views of the Tribunal wherein it has been held that if the loss or gain arising due to fluctuation of foreign exchange on account of revenue receivables on exports then the same will be treated as part of operating cost or operating revenue of the assessee as well as comparable companies. Though the Ld. D.R. has placed reliance on Rule 10TA however, we find that the definition as provided under Rule 10TA of the Income Tax Rules are only for specific purpose to consider the price under Advance Price Agreement. Therefore, to avoid any further ambiguity and uncertainty in the process of advance pricing agreements, the definition has been provided under Rule 10TA which may not be adopted for the purpose of taking the actual margins of the assessee as well as the comparable companies for the purpose of determining the ALP under TNMM method. Thus, in view of the above facts, where the gain earned by the assessee due to foreign exchange fluctuation on the receivables which are revenue in nature, the claim of the assessee is allowed and consequently, the A.O./TPO is directed to compute the margins of the assessee as well as the comparable by considering the loss or gain arising due to foreign exchange fluctuation on revenue receivables as part of the operating cost or operating revenue as the case may be. This ground of the assessee appeal is allowed.
Adjustment claimed by the assessee on account of idle personnel and rent paid in respect of new office as an abnormal cost to be excluded from the operating cost for the purpose of computing the margins of the assessee - The assessee is a wholly owned subsidiary of VTC Varginia, USA. The assessee is engaged in designing transformer components etc., under the projects provided by its A.E. VTC USA. Since the entire work has been outsourced by its A.E. to the assessee and therefore, the assessee is working only as a captive service provider of designing of transformers and transformer components. The assessee is remunerated by its A.E. on the basis of 250% of the remuneration of service engineers who are assigned to work on A.Es project.
When it was found that the assessee could not utilise its capacity to the optimum level in comparison to the comparable companies and therefore, the Tribunal has taken a consistent view that substantial difference in the capacity utilisation warrants a proper adjustment in the margins of the comparable so that the loss to the assessee on account of un- utilisation can be equalised. In this case, it is not the case of the assessee that their capacity is un-utilisation comparison to the comparables. Therefore, the decisions relied upon by the Ld. A.R. of the assessee will not help the case of the assessee on the issue of claim of abnormal cost to be excluded for the purpose of computing the margins of the assessee. We find that the rent paid by the assessee for the new office as well as the salary paid to the engineers hired by the assessee is not an abnormal cost as the assessee has not brought any material on record to show that these office building as well as engineers who were hired from 1st April, 2008 could not be used for the purpose of execution of the work but it may the assessee's own decision not to charge its A.E. to compensate the assessee in respect of the remuneration of these engineers which was otherwise agreed between the parties as per clause-10 of the agreement. Thus when the assessee was to be compensated by the A.E. at 250% of the remuneration of service engineers then the salary paid to the service engineer cannot be considered as an abnormal cost. Hence, in view of the above discussion, we do not find any subsistence or merit in the claim of the assessee.
Selection of comparable - WAPCOS Ltd., is a Government of India undertaking and once the TPO has accepted that the Government of India undertaking cannot be considered as a good comparable of the assessee then to maintain the rule of consistency, this company cannot be considered as a good comparable solely on this ground. Accordingly, once this company is found to be a Government of India undertaking this cannot be accepted as a comparable to the assessee as per the TPO's own finding in respect of other Government of India undertaking. Hence, we direct the TPO/A.O. to exclude this company WAPCOS Ltd., from the set of comparable.
L & T Ramboll Cons. - maximum tolerance range on related party transaction should not exceed 25%. Though the assessee has not disputed the filter of 25% applied by the TPO regarding related party transaction however, once the TPO has applied this filter for the purpose of selecting the comparable companies it is incumbent upon TPO to verify the relevant record of each and every company considered for the selection in the set of comparable to see whether the related party transactions of the comparable companies are within the tolerance raised as applied by the TPO. We do not find any force in the contention of the Ld. D.R. that assessee has failed to produce the authentic record and complete details of this company because of the reason that it is the duty of the TPO to verify the relevant record at the time of selection of comparable companies. Therefore, once the Ld. A.R. of the assessee has filed the details of related party transaction of this company which show more than 25% then this issue requires a proper verification and examination. Accordingly, in the facts and circumstances of the case, we set aside this issue of verification of the related party transaction of this company namely L & T Ramboll Cons. to the record of the TPO/A.O. and then consider the comparability of this company only on the issue of related party transactions. Appeal of the assessee partly allowed.
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2017 (7) TMI 1348 - ITAT CHANDIGARH
Appeal dismissed as not admitted - HELD THAT:- In the acknowledgement-cum-notice certain defects have been pointed out by the Registry, which have been duly noticed by the representative of the assessee. The case was fixed for 30.5.2017. None appeared on behalf of the assessee despite the date of hearing duly intimated in writing in the acknowledgement-cum-notice issued to the person, who has come in person to file the present appeal in the Registry.
In the order-sheet entry dated 30.5.2017, it has been specifically noted down that the defects have not been removed by the assessee and the case was adjourned to 24.7.2017 i.e. for today. The notice issued to the assessee to appear on 24.7.2017 has been received back with the remarks of the Postal Authorities “insufficient address”. Neither any one has come present on behalf of the assessee, nor the defects have been removed and even the address of the assessee as provided in Column No.10 of Form 36 (Form of appeal to the Appellate Tribunal) is insufficient. Under these circumstances, the Memorandum of Appeal is rejected under rule 12 read with Rule 9 of the Income Tax (Appellate Tribunal) Rules, 1963. - Appeal of the assessee is dismissed as not admitted.
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2017 (7) TMI 1347 - ITAT MUMBAI
TP Adjustment - adjustment in respect of 'Guarantee Commission' - HELD THAT:- As decided in own case [2017 (4) TMI 1092 - ITAT MUMBAI] similar issue had been dealt by the tribunal and Guarantee Commission has been restricted to 0.50%. Accordingly, respectfully following the order of the tribunal, we direct the A.O. to restrict the TP adjustment to 0.5% p.a. We direct accordingly. It is pertinent to mention that no new guarantee were given to new AE during the year and the guarantee during the year was in continuation of the old guarantee only.
Disallowance u/s.14A r.w.r. 8D - sufficiency of own funds - HELD THAT:- In the current year i.e. as on 31.3.2012, own funds amounted to ₹ 9595.60 cores as compared to Investments of ₹ 3146.76 crores in terms of the balance sheet of assessee placed at pg. 11 of the paper book. We, therefore, direct the AO to delete disallowance of interest.
As during the year under consideration there is a decrease in investment as per the audited balance sheet placed on record. Investment as on 31.3.2011 was ₹ 39.66 crores, whereas as on 31.3.2011 it was ₹ 31.46 crores. However, there is increase in capital and free reserve as on 31.3.2012 as compared to capital reserves on 31.3.2011. Under these facts and circumstances, relying on the decision of the Hon’ble Jurisdictional High Court in the case of Reliance Utilities [2009 (1) TMI 4 - BOMBAY HIGH COURT] we can reasonably presume that investment was out of own funds and no disallowance of interest is warranted.
Disallowance of administrative expenses u/s. 14A r.w.r. 8D(2)(iii) - Hon’ble ITAT [2017 (4) TMI 1092 - ITAT MUMBAI] has set-aside the matter to ld. AO with the directions to exclude investments giving taxable income and strategic investments and also to verify the working of disallowance under Rule 8D(2)(iii) in light of various judicial propositions - issue restored back to the file of the AO for deciding afresh in terms of the direction given by the tribunal in order dated 24.02.2017. We direct accordingly.
Disallowance u/s. 14A to the book profit u/s.115JB - Restrict the addition u/s.15JB to the extent of disallowance of administrative expenses worked out in terms of direction given by the tribunal [2017 (4) TMI 1092 - ITAT MUMBAI]
Bogus purchases - HELD THAT:- Shri Suresh A. Parekh has confirmed that he had procured materials for Videocon Industries Ltd. and delivered the same at 14, KM Aurangabad. This confirmation was for the financial years 2008-09 to 2011-12. The facts and figures given for FY 2011-12 amounting to ₹ 59,09,78,823/- are pertaining to the issue, i.e., AY 2012-13. We further found that an affidavit was also given by Shri Suresh A. Parekh for FYs 2008-09 to 2011-12. All these were examined by the tribunal and thereafter reached to the conclusion as reproduced above. Under these facts and circumstances, we can reasonably follow the decision of the tribunal for deleting the addition made on account of bogus purchases.
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2017 (7) TMI 1346 - DELHI HIGH COURT
TP Adjustment - addition on account of Advertisement, Marketing and Promotion (AMP) Expenditure - HELD THAT:- ITAT in the impugned order has referred to the decision of this Court in Sony Ericson Mobile Communications (India) Pvt. Ltd. v. CIT [2015 (3) TMI 580 - DELHI HIGH COURT] and also some of the subsequent judgments where the Court has held that in matters of transfer pricing the first exercise that is to be undertaken is to determine if in fact there existed an international transaction between the Assessee at its Associated Enterprise. Only if the said question is answered in the affirmative, the further question of determining its arm’s length price would arise. Counsel on both sides state that all the necessary documents and information for determining the above question already form part of the record of the case in the ITAT.
Restore the aforementioned appeal to the file of the ITAT for a fresh de novo adjudication on merits without reference to the order of the ITAT that has been set aside by this judgment.
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2017 (7) TMI 1345 - ITAT BENGALURU
TP Adjustment - Comparable selection - exclusion of certain comparables by the DRP for the purpose of determining the ALP in respect of international transactions in software segment - HELD THAT:- In the present case, as most of the comparables taken by the TPO were directed to be deleted by the Tribunal, therefore number of comparables available after giving effect to the order of the Tribunal would be less than 6, therefore We direct the TPO to apply RPT filter of 25% on all comparable instead of 15% and find out the fresh comparables, which are otherwise functionally comparable with that of the assessee.
After exclusion of the above company i.e., L & T Ltd, the only two comparables that remain are Persistent Systems & Solutions Ltd and Tinksoft Global Services Ltd. As indicated hereinabove, as the' comparables remain are less than six, therefore, the TPO is required to apply RPT of 25% so as to bring in more comparable companies which are functionally similar to that of the assessee. In view thereof, we direct the AO/TPO to bring in more comparables for determining the ALP on the basis of the directions given herein above, subject to fulfilment of other parameters mentioned herein above. Accordingly, the TP grounds of the revenue as well assessee are allowed for statistical purpose.
Working capital adjustment - TPO has restricted the working capital adjustment from 2.3% to 1.91% on the ground that the same represents optimum working capital adjustment - HELD THAT:- The issue of working capital adjustment is no more a res integra and the assessee is required to be given working capital adjustment based on actual basis. This has been so held by the Tribunal following ARM Embedded Technologies (P.) Ltd. v. Dy. CIT [2015 (8) TMI 1437 - ITAT BANGALORE] AND Mercedes-Benz Research & Development India P. Ltd v. Asstt. CIT [2016 (6) TMI 1322 - ITAT BANGALORE] - Following the above decisions of the coordinate bench of the Tribunal, we dismiss the ground raised by the Revenue in respect of working capital adjustment.
Disallowance u/s 40(A) - HELD THAT:- Deduction has not been claimed on the basis of any provision made in the books of account of the assessee. The deduction had been claimed on account of the gratuity actually deposited in the fund. Tims the deduction was not claimed in respect of a provision. Such a claim could only have been disallowed if it had been proved that the gratuity, in respect of which the said payment had been made, had not become payable during the previous year relevant to assessment year 1979-80. No such case has been made out by the Revenue. Thus, in our view, the Tribunal was right in holding that the grant of approval to the gratuity fund was not relevant for the purposes of this case as the deduction was not being claimed on account of any provision. The deduction was in respect of the amount actually deposited in the fund which had become payable during the previous year relevant to assessment year 1979-80. This factual position has not been disputed nor has the Counsel for the Revenue controverted the factual findings that in the earlier years, similar claims of the assessee had been allowed by the Assessing Officer or by the CIT (Appeals) and the orders stand accepted by the Revenue.
Disallowance under section 14A r.w.r 8D - HELD THAT:- Once the AO has recorded the satisfaction that the assessee has earned the exempt income, however the AO is not satisfied that no expenses was incurred by the assessee (in the present case - nil), was not correct. Therefore, the necessary sequel of recording the satisfaction is the AO shall embark upon to apply Rule 8D and calculate the expenditure. In the present case, the AO has applied the Rule 8D and has calculated the expenditure by applying ½% of the value of the investment which comes to ₹ 62,500/-. In our view, there is no irregularity in the order passed by the AO/TPO. Accordingly, the objection of the assessee in ground No.4 is dismissed. calculate the expenditure. In the present case, the AO has applied the Rule 8D and has calculated the expenditure by applying ½% of the value of the investment which comes to ₹ 62,500/-. In our view, there is no irregularity in the order passed by the AO/TPO
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2017 (7) TMI 1344 - ITAT CHANDIGARH
Characterization of income - interest income from H P SEB - 'income from other sources' or 'business and profession' - HELD THAT:- Compulsory security deposits made by the assessee with the Electricity Board for obtaining / running of the electricity connection were not made by the assessee not for investment purposes rather the same were mandatory required to be made for getting electric connection for operating / running of the manufacturing activity of the assessee. The nature of the income from the said activity is to be gauged by looking at the purpose and object of such deposits.
The purpose of the deposits, in our view, is not for an investment and earning of interest income but for obtaining of the electricity connection required for manufacturing / business activity of the assessee. The incidental income, if any, earned therefrom is, thus, is to be treated as 'business income' of the assessee as the same is the outcome of the deposits made for business purposes
The said income earned from the security deposits against the business expenses and in is eligible to be set off particular the interest expenditure incurred by the assessee on the loan amount borrowed from the bank / financial institutions. Allow this ground of the assessee and hold that the interest income earned by the assessee on security deposits from H P SEB is to be treated as business income of the assessee and the assessee is entitled to set off the same against the business expenditure.
Reducing the income from interest from H P SEB, rent received, Misc. receipt etc. from the profits of the unit eligible for deduction u/s 80IC - HELD THAT:- Though the assessee is entitled to netting of such income against business expenditure but the assessee is not entitled to include the said income in the eligible profits of the undertaking in view of the laws laid down by the Hon'ble Supreme Court in the case of 'Pandian Chemicals Ltd Vs. CIT' [2003 (4) TMI 3 - SUPREME COURT]
Income from rent received - same analogy can be applied and the same is not the income derived by the undertaking and, hence, is not eligible for deduction u/s 80IC
Amount towards Misc. Receipts assessee has stated at bar that he does not press this issue because of smallness of the amount, however, the issue on merit regarding the admissibility of the said receipt towards deduction u/ s 801C be kept open. We, accordingly dismiss this issue of Misc. receipts holding that the dismissal of the above claim will not have any precedential value. The issue regarding the admissibility of such a claim is kept open to be adjudicated at appropriate time / case.
Not treating the interest reimbursement received under Technology Upgradation Fund Scheme (TUFS)' as capital receipt - The reimbursement of the interest expenditure under the TUFS scheme was not an income of the assessee, rather the same was reimbursement of the expenditure incurred by the assessee. However, the issue next to be considered is as to whether the assessee had already claimed the said interest expenditure in any previous year, and if yes, it will amount to allowing double deduction benefit to the assessee. Assessee has stated that though as per the instructions of his client, the assessee upto the extent of reimbursement of the interest expenditure as per TUFS scheme has not claimed the same as expenditure in earlier years. He, however, has submitted that he has no objection if this aspect is examined / verified by the Assessing officer. We accordingly restore this issue to the file of the Assessing officer for the limited purpose to examining as to whether the assessee has already claimed deduction of expenditure including the amount reimbursed to the assessee under TUFS scheme? If, it is found that the assessee has not so claimed it as expenditure in earlier years, the assessee will be entitled to the netting of the said reimbursement amount against the interest expenditure.
Interest income received on delayed payments from customers - whether is 'business income' or 'income from other sources' - HELD THAT:- CIT (A) has relied upon the decision of the Hon'ble Jurisdictional Punjab & Haryana High Court High Court in the case of 'Phatela Cotgin Industries (P) Ltd v CIT' [2007 (5) TMI 226 - PUNJAB AND HARYANA HIGH COURT] wherein as held that the interest which is received on delayed payment on account of sale to customers of the manufactured goods can clearly be termed to be 'income derived from an industrial undertaking' and distinct from income on account of interest received from fixed deposits. The Ld. DR has not pointed out any case law contrary to the above proposition of law laid by the Hon'ble Jurisdictional High Court. The issue is, thus, squarely covered in favour of the assessee
Treating the activity of twisting and texturing of yarn as manufacturing activity for the purpose of deduction u/s 80IC - HELD THAT:- As relying on EMPTEE POLY-YARN P. LTD. [2008 (2) TMI 313 - BOMBAY HIGH COURT] there is no infirmity in the order of the CIT (A) in holding that the conversion of yarn into thread by the assessee company amounts to manufacturing activity and, therefore, the income earned form such activity is eligible for deduction u/ s 80IC of the Act. There is no merit in this ground of appeal of the Revenue and the same is accordingly dismissed.
Eligibility of the insurance claim u/ s 80IC - HELD THAT:-The purpose of insurance is always to get indemnified against any unforeseen loss. However, the question before us is whether such reimbursement / insurance claim has been paid to the assessee on account of Capital loss or Revenue loss. We accordingly direct the Assessing officer to examine as to whether the insurance claim has been paid to the assessee in view of the loss on capital assets or in view of loss on business assets. If the same is found to be on account of claim of loss of business assets, assessee will be entitled to set off of the same against the business expenses
Income earned by the asses see from brokerage on ocean freight is eligible for deduction u/ s 80IC
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2017 (7) TMI 1342 - ITAT JAIPUR
Penalty u/s 271(1)(c) - assessee had claimed excessive depreciation on UID Kit claiming to be part of the computer - Bonafide belief - HELD THAT:- There is no dispute with regard to the position, that the assessment proceedings and penalty proceedings are two different and distinct proceedings. If the assessee is having any plausible explanation with regard to the default and the Act of the assessee is bonafide. In that event the penalty cannot be levied. It is the contention of the assessee that in the present case the assessee under a bonafide belief that UID Kit being a part of computer, therefore, it claimed depreciation at 60%.
CIT(A) deleted the penalty finding that the claim was bonfide in view of the judicial pronouncements as relied. In our consider view, there is not infirmity into the order of the Ld. CIT(A) when it is established that the claim was made under the bonafide belief, hence, there was no reason to impose penalty. This ground the Revenue’s appeal is dismissed.
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2017 (7) TMI 1338 - ITAT AMRITSAR
Addition u/s 40A(3) - Cash payment exceeding permissible limit - HELD THAT:- Assessee had not made any cash payment to the land owners directly and the sale deed have been executed between the land owners and the purchasers directly as it reflects from the conveyance deeds.
Assessee did not make any purchase of land in the controversy and even otherwise in the assessee’s case qua A.Y.2010-11 was dealt with by the Co-ordination Bench of ITAT, Amritsar, whereby deleted the addition as disallowed under the said provision.
Finally, considering the over all facts, conclusion and effects of the order passed by the Co-ordination Bench as well as independently applying the mind, we do not find any infirmity, impropriety and illegality in the order passed by the Ld. CIT(A), therefore, it does not require to be interfered with. - Decided against revenue
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