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2018 (6) TMI 1849 - BOMBAY HIGH COURT
Disallowance u/s 40(a)(ia) - ITAT deleted addition - HELD THAT:- Tribunal allowed Assessee's appeal by following the order of its coordinate bench for the Assessment Year 2009-10 in respect of the same respondent - Assessee
Revenue very fairly points out that being aggrieved by the above order of Tribunal the Revenue filed an appeal to this Court. The appeal [2017 (7) TMI 1235 - BOMBAY HIGH COURT] This by following an earlier order of Division Bench of this Court in the matter of Commissioner of Income Tax -2 Vs. Health Indian TPA Services Pvt. Ltd [2015 (12) TMI 568 - BOMBAY HIGH COURT]
Revenue is not able to point out any distinguishing features in this case which would warrant taking a different view from that taken in Income Tax Appeal (supra). No substantial question of law arises.
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2018 (6) TMI 1848 - ITAT CHENNAI
Penalty levied u/s 271D - assessee has received cash exceeding ₹20,000/- from the Trust - assessee contended before AO that there was no loan or deposit - HELD THAT:- We have carefully gone through the judgment of Madras High Court in Idhayam Publications Ltd. [2006 (1) TMI 97 - MADRAS HIGH COURT] assessee contended before the Assessing Officer that there was no loan or deposit. AO rejected the claim of the assessee and levied penalty. The Tribunal, however, found that the proprietor of the sister concern, which deposited the funds, was one of the directors of the company and there was a running current account in his name. Therefore, there is no violation of Section 271D of the Act. In this case also, Shri A.N. Radhakrishnan is one of the directors in the assessee-company and he is also a trustee in other two Trusts. Therefore, this Tribunal is of the considered opinion that it is not a fit case for levying penalty under Section 271D of the Act.
Period of limitation - Moreover, for the assessment years 2008-09 and 2009-10, the penalty proceeding was initiated almost after six years. In view of the judgment of Madras High Court in M. Srinivasa Rao [2007 (9) TMI 32 - HIGH COURT , MADRAS] penalty proceeding should have been initiated within reasonable time even though no limitation was provided in the Income-tax Act. The threat of initiating penalty proceeding cannot be allowed to hang over the head of the assessee for an unreasonable period of time. There should be an end to the proceeding, that also within a reasonable period. Hence, in view of the judgment of Madras High Court in M. Srinivasa Rao (supra), the penalty proceeding initiated by the Assessing Officer for assessment years 2008-09 and 2009- 10, after the expiry of almost six years, is barred by limitation. Appeals filed by the assessee are allowed.
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2018 (6) TMI 1847 - ITAT CHANDIGARH
TDS u/s 194C and 194A - External Development Charges (herein referred to as ‘EDC’) and interest on late payment of EDC to Greater Mohali Area Development Authority (‘GMADA’) - AO held that tax was required to be deducted u/s 194C and u/s 194A on interest payment made to GMADA - As the assessee had not deducted tax at source, he treated the assessee/person responsible as ‘assessee in default’ and created demand u/s 201(1) / 201(1A)
HELD THAT:- A perusal of the notifications and policies of the Govt. also clearly reveal that though, in lieu of the benefits, concessions, incentives given by the government to the promoter for the purpose of development of infrastructure, the proportionate cost at fixed rates is got deposited by the government from the promoter for external development work, yet, the development is carried out by the local authority out of its own obligations/duties. The entire discussion can be summed up in the manner that though the promoter contributes towards the proportionate cost of infrastructure development, however, the works are not carried out by the local authority in consequence of specific performance of the agreement/contract but out of its own obligations and duties towards the public. Since the agreement cannot be said to be a work / service contract, hence, the provisions of section 194C will not be attracted in this case.
Interest paid on account of delayed payment of EDC charges - The perusal of the above statutory provisions of section 29 of the Punjab Regional and Town Planning and Development Act, 1995, read with notification dated August 14,2006 reveals that the GMADA has been established by the State Act. As per the sub section (4)(1) of section 29, ‘GMADA’ is a body corporate as well as local body.
In the case of ‘CIT (TDS) Vs. Canara Bank’ [2016 (5) TMI 570 - ALLAHABAD HIGH COURT] has elaborately discussed the distinction between a corporation established under an Act and body incorporated under an Act.
Hon'ble High Court while replying upon the decision in the case of Dalco Engineering (P.) Ltd. v. Satish Prabhakar Padhye [2010 (3) TMI 912 - SUPREME COURT] has observed that a company incorporated under the Companies Act is not created by the Company Act but comes into existence in accordance with the provisions of the said Act and that there was a well-marked distinction between body created by a statute and a body which after coming into existence is governed in accordance with the provisions of a statute.
The Hon'ble High Court while discussing about the status of ‘New Okhla Industrial Development Authority, Noida’ which was established under the Uttar Pradesh Industrial Area Development Act, 1976 has held that the said corporation (Noida) was established by the State Act and, therefore, was entitled to exemption payment of tax u/s 194A of the Act. The above decision of the Hon'ble Allahabad High Court is squarely applicable to the facts and circumstances of the case as the GMADA has been constituted by the State Government Act and it has been specifically provided that it is a body corporate and in view of the notification dated October 22, 1977 of the Central Government, the GMADA falls under the definition of any Corporation established by the Central, State or Provincial Act and thus the provisions of section 194A are not applicable. In view of this, the assessee was not liable to deduct TDS while remitting interest on delayed EDC charges to the GMADA.
We uphold the order of the CIT(A) in setting aside the impugned demand but on different grounds as discussed above. It is clarified that any observation made in this order will not be construed to or subscribing to or approving of the view in any manner of the CIT(A) that the EDC charges or interest thereupon by GMADA was not the taxable income of the GMADA. The above question is left open to be decided in an appropriate case. This appeal of the revenue is dismissed
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2018 (6) TMI 1846 - ITAT MUMBAI
TDS u/s 194C - assessee AOP worked as sub-contractor - AO was of the view that the capacity of the AOP was a sub-contractor, therefore, the Joint Venture was under obligation to deduct the TDS - CIT(A) held that provision u/s 194C of the Act is not applicable and allowed the claim of the assessee - HELD THAT:- Joint Venture has received the contract work by way of agreement. The parties have only the relationship inter-see in respect of Joint responsibility that existed in relation to the principal i.e. National Highway Authority of India. In fact, both the parties have decided to execute the contract on their own part. There is nothing on record to which it can be assumed that each member was interfering with the work of another. The Joint Venture is the main contractor and the members are not sub-contractor when the members are nowhere falls within the category of sub-contractor then there is no question of deduction u/s 194C of the Act and the question of disallowance u/s 40(a)(ia) of the Act nowhere arise.
Under the Joint Venture each party was under obligation to execute its own work according to its technical skill and capability for specified consideration and to bear its own losses and to retain its own profit separately. Each party is liable to be assessed as separate and independent entity. The contract awarded by the NHAI was a divisible contract. The Joint Venture was having specific constitution with regard to execution of work of independent entity.
As relying UAN RAJU CONSTRUCTIONS [2011 (5) TMI 636 - ITAT VISAKHAPATNAM] wherein held no merit in the presumption made by the AO that the Joint Venture is the "Main Contractor" and the members are the "Sub-contractors", thus we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Decided against revenue.
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2018 (6) TMI 1845 - ITAT JAIPUR
Tax free allowances - entitlement of judicial official of salary and allowances - scope of Shetty Commission recommendations - Disallowance of house rent allowance, medical allowance, sumptuary allowance and residence office allowance claimed by the assessee as exempt - assessee is a judicial Officer of Rajasthan judicial services and at present working as Additional District Judge - AO disallowed the claim of the assessee by holding that as per the provisions of Income Tax Act these allowances are not exempt from tax but are part of the salary income of the assessee - AO contended that as per the recommendation of the Shetty Commission these allowances are tax free and not to be included in the salary income of the assessee for the purpose of income tax.
HELD THAT:- HRA - Hon'ble Supreme Court in case of All India judges Association & Ors. v. Union of India & Ors [2001 (2) TMI 1023 - SUPREME COURT] has declined to accept the recommendation of the Shetty Commission for payment of house rent allowance over and above the official accommodation provided to the Judicial Officer. Therefore, the Hon'ble Supreme Court has held that the Judicial Officers are entitled for house rent allowance only when the Government, for any reason, is not able to make allotment or make available official accommodation. Thus as per the judgment of Hon'ble Supreme Court the Judicial officers are entitled for the house rent allowance at par with the other government officials and even equal to the judges of Hon'ble High Courts subject to the quantum of allowance varies from case to case depending upon the percentage of salary. Though the house rent allowance is exempt from tax as per provisions of High Courts judges (salaries and conditions of service) Act, 1954 as well as Supreme Court judges (Salaries and conditions of service) Act, 1958 however, the payment of HRA to the Judicial Officer is not governed by the provisions of these Acts. Section 22D of High Court judges (Salaries and conditions of service) Act 1954 and Section 23D of Supreme Court judges (Salaries and conditions of service) Act 1958 are pari material.
Thus it is clear that the value of rent free official residence provided to a judge or the allowance paid to him under sub-section (1A) of Section 23 is excluded is exempt from liability to pay income tax.
The provisions of High Court judges (Salaries and conditions of service) Act 1954 and as well as the Hon'ble Supreme Court judges (Salaries and conditions of service) Act 1958 are applicable only in respect of the judges of Hon'ble High Courts and Hon'ble Supreme court. The Judicial Officers government by the service conditions of the state higher judiciary cannot claim the benefit of High Courts judges (Salaries and conditions of service) Act 1954 as well as the Supreme Court Judges (Salaries and conditions of service) Act 1958. Therefore, the HRA drawn by the judicial officer of state higher judiciary is exempt only to the extent of the provisions of section 10(13A) r.w.r. 2A of the Income Tax Rules.Thus, in view of the above discussion, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue.
Medical allowance - In case of Smt. Shilpa Sameer the Judicial Officer the Assessing officer while passing the assessment U/s. 143(3) of the Act dated 30.09.2013 has allowed the medical allowance as exempt to the extent of Rs. 15,000/-. Thus, we direct the AO to reconsider this issue of allowing the claim of exemption of medical allowance to the extent of Rs. 15,000/-. If the Assessment order in case of Smt. Shilpa Sameer is not disturbed till date then the claim of the assessee shall also be allowed to the extent of Rs. 15,000/-.
Sumptuary allowance - CIT(A) has rejected the claim of the assessee on the ground that the assessee has not brought on record any section, notification, circular etc. as issued by the CBDT - We find that the CBDT vide letter No. 35/32/66-IT(B), dated 24-9-1966 has made it clear that sumptuary allowance has to be treated as an entertainment allowance and accordingly, the said allowance received by a person who is in receipt of salary from the Government, to the extent of such allowance are required to be deducted in computing the income chargeable under head salaries U/s. 16(ii)(a) - Thus, the CBDT circular has clarified that this allowance may be regarded as entertainment allowance and exempt from payment of income tax. We hold that the Sumptuary allowance is exempt from payment of income tax and accordingly to be excluded as a deduction while computing income under the head salary.
Residence Office Allowance - We note that residence office allowance of Rs. 3,000/- received by the assessee is on account of minimum day to day expenses incurred by the assessee for keeping the residence office functional. Therefore, the expenses incurred on account of official work which is reimbursed by the Government in the shape of allowance cannot be treated as income of the assessee. In our view the allowance is paid to the Judicial Officer to avoid the furnishing accounts of petty expenses by the Judicial Officer for reimbursement. Thus, to avoid the production or furnishing of account of petty expenses in respect of residence office, the allowance is paid in lieu of reimbursement of such petty expenses. Accordingly, the residence office allowance cannot be treated as income of the assessee and the same has to be excluded from the salary income.
Leave Encashment - Though there is no provisions under the Income Tax Act to exempt the leave encashment from tax during the service of Government employee except the provisions of Section 10(10AA)(i) of the Act applicable at the time of superannuation.
Notification of Government of Odisha Gazette dated 25.06.2013 after consulting the Ministry of Law and Justice Government of India has decided that encashment of leave admissible to Judicial Officer in state shall continue to subject to applicable taxes. The language of the said gazette notification shows that the earlier resolution dated 17.08.2010 was modified vide this gazette notification dated 25.06.2013. Therefore, the said notification cannot be applied to the assessee before us with retrospective effect.
Vide judgment in case of All India Judges Association & Ors. v. Union of India and Ors [2001 (2) TMI 1023 - SUPREME COURT] subject to the modification all the recommendations of the Shetty Commission were accepted. The recommendation for leave encashment and leave salary was not modified by the Hon'ble Supreme Court but was accepted as recommended by the Shetty Commission. Therefore, in view of the fact that the leave encashment was recommended as tax free and accepted by the Hon'ble Supreme Court prior to the notification dated 25.06.2013 the leave encashment would be tax free. In the result, the appeal of the assessee is partly allowed.
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2018 (6) TMI 1844 - ITAT DELHI
TP Adjustment - addition on account of Arm's Length Price - comparable selection - assessee is engaged in the business of providing IT-enabled Services(ITES) and business support services, such as financial reports/related documents, technical service for development of software and other similar services to its AE on a ‘cost plus mark up’ basis - HELD THAT:- It is pertinent to note that the Tribunal in assessee’s own case for A.Y. 2007-08 [2017 (12) TMI 1731 - ITAT DELHI] rejected the three comparables i.e. Vishal Information Technologies Ltd., Wipro Ltd., Mold-tek Technological Ltd. as functionally different from the assessee company.
Genesys International Corporation Ltd.comparable provides Geospatial Services, viz., photogrammetric services, preparation of cadastral maps from aerial photographs etc. using niche software tolls which requires a different skill set, e.g., services of draftsman, cartographers and civil engineers etc. and need highly skilled manpower. Therefore, this comparable is rightly rejected by the CIT(A) as given a categorical finding as to the function of the comparable and the requirement of the highly skilled manpower.
Excess depreciation on computer accessories - Whether eligible items for depreciation at 60%? - HELD THAT:- CIT(A) has given the finding that the assessee had purchased computer peripherals like wireless access point, G-Tran, Carry cass, Pan Cards, spike buster, pen drive, ETI enhancements, switches, keylock, battery, tae, extension card, tv tune, convertor, charger etc. Rs. 1,62,975/- as computer peripherals. The Hon’ble Jurisdictional High Court in BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] classified these items as eligible items for depreciation at 60%. Therefore, the decision of the Hon’ble Jurisdictional High Court is squarely applicable in assessee’s case. Therefore, Ground No. 2 of the Revenue’s appeal is dismissed.
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2018 (6) TMI 1843 - ITAT KOLKATA
TP Adjustment - royalty payment made to associate enterprise - Nil ALP determined - HELD THAT:- It is clear first of all that the lower authorities have been very fair in not holding the assessee’s royalty transactions to be a sham ones. They have applied benefit and commercial expediency test in the instant case whilst computing nil ALP. We see no reason to approve the same these two tests of benefits and commercial expediency are not to be invoked as per the above legal position. The impugned action of the lower authorities under challenge is therefore held to be not sustainable.
Quantification of the impugned ALP - TPO admittedly applied ‘CUP' method in his order (supra). He appears to have treated the tax payer itself as a valid comparable as it had not paid any royalty to the very payee in earlier assessment years. This made him to adopt nil price of the impugned royalty so as to make the adjustment in question.
No reason to concur with such a course of action since the assessee itself having paid Nil amount in the past to the AE, cannot be taken as a valid comparable. This tribunal in the case of Technimont ICB India (P) Ltd.[2013 (9) TMI 595 - ITAT MUMBAI] has concluded long back that a transaction between payee and its AE is not an uncontrolled one so as to be taken as a comparable. We accept the assessee’s instant first substantive ground both on legality as well as on quantification therefore. The impugned ALP adjustment stands deleted accordingly.
Disallowing provision for leave encashment u/s 43B(f) - HELD THAT:- This issue deserves to be remitted back to the Assessing Officer for taking a fresh call after the hon’ble apex court’s decision in the Revenue’s special leave petition converted to appeal staying operation of hon’ble jurisdictional high court’s judgment in Exide Industries Ltd.. [2007 (6) TMI 175 - CALCUTTA HIGH COURT] deleting identical disallowance as well as holding the statutory provision itself to be unconstitutional. We accept this fair stand and direct the AO to keep the instant issue in abeyance to be decided after the hon’ble apex court’s final verdict in the department’s appeal hereinabove.
Accrual of expenditure - Addition of commission charges - year of allowability - disallowance on the ground that the same is raised on accrual basis without any details being submitted - HELD THAT:- Departmental Representative, fails to dispute that the assessee’s stand throughout is of having filed all the relevant details before the AO. We therefore conclude that in absence of any material doubting accrual of the impugned expenditure in the relevant previous year, the same has to be held allowable in the assessment year in question only as per decision in the case of Bharat Earth Movers [2000 (8) TMI 4 - SUPREME COURT The assessee succeeds in its instant substantive ground.
Computing book profit u/s 115JB when Section 14A r.w.r 8D disallowance pertaining to its exempt income - HELD THAT:- Learned counsel’s only plea during the course of hearing is that the assessee has already offered the very sum in its return at the first instance. We therefore leave it open for the Assessing Officer to carry out necessary verification in order to avoid double disallowance. This substantive ground is taken as accepted for statistical purposes.
TP Adjustment - goods exported to Associate Enterprises outside India forming subject matter of international transactions - MAM selection - whether such domestic sales in case of independent parties vis-à-vis export sales to AEs could be taken as comparables or not? - HELD THAT:- A co-ordinate bench in M/s. Wrigley India Private Limited[2015 (1) TMI 193 - ITAT DELHI] declined the Revenue’s similar arguments applying CUP Method in identical circumstances -Undoubtedly, direct methods of determining ALP, including cost plus method, have an inherent edge over the indirect methods, such as TNMM, but such a preference can come into play only when appropriate comparable uncontrolled transactions can be identified and analysed accordingly. That has not been done in the present case. There is, therefore, no good reason to disturb the TNMM method adopted by the assessee.
Addition of club expenditure invoking Section 40(9) - HELD THAT:- No dispute about genuineness of the impugned expenditure to have incurred in a club set up at IEL, Gomia for entertainment and seminars. We observe in this backdrop that the lower authorities have wrongly invoked Section 40(9) as the same is attracted in case of specified purpose only and not qua a claim raised u/s 37 - DRP has deleted the very disallowance in the preceding assessment year. The same has attained finality. We thus adopt judicial consistency to delete the impugned disallowance as well.
Assessee appeal partly allowed.
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2018 (6) TMI 1842 - ITAT DELHI
Receipts chargeable to tax u/s 44BB - Whether revenues of the Assessee as Fees for technical Services (‘FTS’) ? - as argued services rendered by the Assessee were ‘in connection’ with installation/handling tools to facilitate wellhead/ X-mas tree installation relating to prospecting etc. of mineral oil.- HELD THAT:- In view of the above decision of Co-ordinate Bench rendered in the case of assessee itself for A.Y. 2010-11 as relying on ONGC [2015 (7) TMI 91 - SUPREME COURT] we have no reason to take a contrary view. Accordingly, we also hold that the receipts of the assessee are chargeable to tax as per provisions of section 44BB of the Act.
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2018 (6) TMI 1841 - ITAT CHANDIGARH
Manufacturing and sale of finished goods outside the books of account - HELD THAT:- We find that no justification whatsoever has been given by the AO as to why the value of semi finished goods sold to its sister concern should not be considered in the total production of the yr for the purpose of determining the percentage of scrap generated.
There is no material on record on the basis of which the suspicion of the AO can be supported that over and above the semi finished goods, the assessee produced finished goods, we note that the CIT(A) has given a categoric finding that the AO has neither rejected books of account nor brought out any evidences to support the suspicion that there was unaccounted manufacturing and sale of finished goods nor has AO made out any case that there were unaccounted sales. Addition having been made on suspicion in peculiar facts, we find, has correctly been deleted by the CIT(A). In the absence of any infirmity, the departmental ground is dismissed
Disallowance of Expenses - HELD THAT:- On a careful consideration of the same, we find that admittedly the disallowances have been made and been sustained by the AO and the CIT(A) respectively without any cogent reason. The books of account have been produced. Evidences supporting the claim are available on record. In the absence of any rebuttal on the same, the AO or for that matter, the tax authorities are not justified to enter into the terrain for determining the reasonableness of the expenditure. The legal position on the said aspect is well settled. Respectfully following the precedent, ground No. 2 of the assessee is allowed.
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2018 (6) TMI 1838 - HIMACHAL PRADESH HIGH COURT
TDS u/s 194A - interest payable to the claimants on compensation awarded under Employees' Compensation Act - HELD THAT:- Section 194A of Income Tax Act, 1961, clearly provides that any person, not being an individual or a Hindu undivided family, responsible for paying to a ‘resident’ any income by way of interest, other than income by way of interest on securities, shall deduct income tax on such income at the time of payment thereof in cash or by issue of cheque or by any other mode. Compensation awarded under Motor Vehicles Act or Employees' Compensation Act in lieu of death of a person or bodily injury suffered in a vehicular accident, is a damage and not an income and cannot be treated as taxable income.
As well settled that interest awarded by the Motor Accident Claims Tribunal on a compensation is also a part of compensation upon which income tax is not chargeable as also held by the Division Bench of this Court in Court on its own motion vs. The H.P. State Cooperative Bank Ltd. And others[2014 (10) TMI 972 - HIMACHAL PRADESH HIGH COURT]. The same principle will be applicable in the present case also.
Deduction of income tax by petitioner/Insurance Company on the interest accrued/awarded on the compensation deposited by the petitioner/Insurance Company is illegal and is contrary to the law of land.
This petition is disposed of directing Income Tax Officer, Nahan to refund the TDS to the petitioner/Insurance Company within ten weeks from date of receiving information thereof, failing which petitioner company shall also be liable to pay interest @ 9% per annum on the said amount with effect from 1st February, 2018, till payment/deposit.
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2018 (6) TMI 1836 - ITAT DELHI
Reopening of assessment u/s 147 - Necessity of recording satisfaction by the AO as required prior issuing the notice u/s 147 - unexplained investment in share capital - HELD THAT:- AO himself was of the view that the amount so invested in share application money needs verification, despite that he has the reason to believe that the investment in share application money and extent of availability during the year 2006-07 (wrongly mentioned in the reasons recorded as “2006-06”) is from (wrongly mentioned in the reasons recorded as “form”) undisclosed sources which is escaped to tax, which is not sustainable in the eyes of law as laid down in the case of Sampatraj Dharmichand Jain [2016 (7) TMI 67 - GUJARAT HIGH COURT] wherein it has been observed that “reopening may not be permitted for mere verification purpose.” Appeal of the assessee is allowed.
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2018 (6) TMI 1833 - ITAT RAJKOT
Exemption u/s 11 - computing benefit of accumulation - inclusion/exclusion of deemed income - HELD THAT:- A careful perusal of the language employed in section 11 makes it crystal clear that exemption is available only on the ‘income (within the meaning of section 11 and not on the ‘deemed income’). Consequently, the assessee cannot accumulate deemed income either u/s 11(1)(a) or 11(2).
As following the esteemed views of Natwarlal Chowdhury Trust case [1989 (8) TMI 19 - CALCUTTA HIGH COURT] we uphold the plea of the assessee that, for the purpose of computing benefit of accumulation, deemed income is to be taken into account. The addition as confirmed by the CIT(A), must, therefore, stand deleted. We order so.
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2018 (6) TMI 1831 - ITAT JAIPUR
Deduction u/s 80IE - Tax Audit Report alongwith Form No. 10CCB were filed before the AO manually whereas it is mandated by Income Tax Act rules to file relevant tax audit report and Form 10CCB electronically - HELD THAT:-As not disputed that the assessee filed the requisite tax audit report in Form No. 10CCB during the course of assessment proceedings and before the assessment order was passed by the AO. The Hon’ble Madras High Court in case of CIT vs. AKS Alloy Pvt. Ltd. [2011 (12) TMI 39 - MADRAS HIGH COURT] while considering an identical issue of not filing of audit report in Form 10CCB along with return of income but filed the same before the assessment was completed held that filing of audit report along with the return was not mandatory but directory and that if the audit report was filed at any time before the framing of the assessment, the requirement of the provisions of the Act should be held to have been met.
The order of Hon’ble Madras High Court has been affirmed by the Hon’ble Supreme Court in case of CIT vs. G.M. Knitting Industries (P.) Ltd.[2015 (11) TMI 397 - SC ORDER] - Decided against revenue.
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2018 (6) TMI 1829 - ITAT DELHI
TP Adjustment - legal and professional charges under intra-group services - TPO had passed a rectification orderwhich has resulted in reduction of total adjustment from Rs. 42,50,763/- to Rs. 9,91,844/- only which represents the disallowance of mark-up charged by the AE - HELD THAT:- As AR submitted that and if the assessee’s ground was accepted in principle, the adjustment with respect to the mark up will not be contested by the assessee, in such a situation, we direct the AO to pass the final assessment order incorporating the adjustment only to the extent of Rs. 9,91,844/- and also protect the assessee’s right to raise these grounds again in this assessment year in the event of the final assessment order not having been passed restricting the transfer pricing adjustment to Rs. 9,91,844/- only.
Directions of the Ld. DRP in confirming the provision for loss on suspended contracts by treating the same as contingent liability - HELD THAT:- The amount represents bank guarantee furnished by the assessee to its customers which was given in the year under consideration but en-cashed by the customers in AY 2011-12. It is also undisputed that the assessee has already offered to tax the amount of advance which had been forfeited from the customers and to which the bank guarantee relates. The bank guarantee has been en-cashed in the subsequent assessment year, therefore, the liability has crystallized in the subsequent assessment year when it was en-cashed on 28/04/2010. The fact remains that at the time of furnishing the bank guarantee, it was not known as to when the liability will crystallize. Accordingly, we find no reason to interfere with the directions of the Ld. DRP.
TP Adjustment - services offered by the AE were not stewardship services - HELD THAT:- DRP has taken note of the fact of the assessee providing substantial evidence in form of e-mails, correspondence with the AE etc. so as reach a conclusion that the AE was rendering services which were beneficial for the assessee in conducting its business and some benefits might have accrued to the overall group but the primary beneficiary was the assessee. DRP concluded that the services rendered by the AE were not in the nature of stewardship activity. Although the Department has assailed these directions of the Ld. DRP, in the proceedings before us, the Department could not point out any factual or legal error in the directions of the Ld. DRP by leading any evidence to the contrary. In such a situation, we are not in a position to differ from the findings of the Ld. DRP and we, accordingly, dismiss ground no. 4.
Disallowance pertaining to advances and deposits written off - HELD THAT:- DRP directed deletion of disallowance by observing that from the material available on record, the same appeared to be revenue in nature. Thus, it is not the case of the department that the issue was not examined. The Ld. DRP has returned a categorical finding in this regard and, accordingly, we find no reason to interfere on this issue also. Ground No. 2 also stands dismissed.
Allowance of provision for warranty - HELD THAT:- DRP has noted that the facts were identical in AY 2008-09 and the year under consideration and, therefore, the disallowance was to be deleted. We also find that the department’s challenge to the findings of the Ld. CIT (A) on this issue in AY 2008-09 was dismissed by the ITAT . The Department has not been able to bring out any distinguishing factor with respect to the facts in the proceedings before us. In the circumstances, we find no reason to interfere and dismiss ground no. 3.
DRP directing that the TPO/AO to consider the margin realized by the assessee only from its international transactions with its AEs and there cannot be entity level margins - HELD THAT:- A perusal of the directions of the Ld. DRP shows that this aspect has not been considered in a proper perspective by the Ld. DRP and the directions in this regard have been given without recording a finding of fact in this regard and without giving any sound reason for such direction. In the circumstances, we have no option but to restore this ground to the file of the Ld. DRP with a direction to pass a speaking order on the issue after giving proper opportunity to the assessee. Accordingly, ground no. 2 stands allowed for statistical purposes.
Loss on suspended contracts - HELD THAT:- Ld. DRP has discussed the issue at length on pages 11 and 12 of its directions and has held that the contention of the assessee is allowable in view of the facts. The AO is directed to give effect to the directions of the Ld. DRP in this regard. Accordingly, this ground is treated as allowed.
Rectification of mistakes u/s 154 - failure to provide an opportunity to the assessee of being heard before enhancing the income and this violated the provisions of section 154(3) - HELD THAT:- The Hon’ble Apex Court in the case of Chockalingam & Meyyappan [1962 (10) TMI 48 - SUPREME COURT] is precisely holding that principle of natural justice has to be followed by the authorities. As per Section 154(3) of the Act amendment/rectification which has the effect of enhancement of an assessment or reducing a refund or otherwise increasing the liability of the assessee shall not be made unless the authority concerned gives notice to the assessee of its intention to do so. Therefore, it is obligatory under the statute to issue notice by the tax authority to give a reasonable opportunity of being heard to the Assessee. This is clearly set out u/s 154 of the Income Tax Act and it has to be followed by the tax authorities at the initial stages. If this procedure of issuing the notice and giving reasonable opportunity of being heard is not followed, any further exercise will be non est. Therefore, the order itself becomes void ab initio. In the circumstances, we have no other option to set aside the impugned rectification order as being void ab initio.
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2018 (6) TMI 1828 - ITAT KOLKATA
Miscellaneous applications seeking to recall the order passed by this Tribunal [2019 (10) TMI 1549 - ITAT KOLKATA] wherein this Tribunal had dismissed the appeals of revenue for want of grounds of appeal - HELD THAT:- The revenue had filed grounds of appeal before us and both the parties on verification of records considered that these grounds of appeal were duly approved by the Pr. CIT even before filing of appeals of Tribunal. Since this fact remains undisputed and in view of the fact that the grounds filed by the revenue are before us , we are now inclined to recall the orders passed by us. Accordingly, the miscellaneous applications of the revenue are allowed. The registry is directed to fix for hearing on 31.07.2018 and both the parties are informed in the open court about the scheduled date of hearing and no fresh notices would follow.
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2018 (6) TMI 1827 - ITAT DELHI
Assessment of trust - claim of depreciation as assessee had claimed the amount incurred on purchase of assets in earlier years as application of income - set off of loss of earlier deficit with current year income - HELD THAT:- After hearing Ld. DR and on perusal of the impugned order we find that, since the issues raised in the grounds of appeal are squarely covered by the judgement of Hon’ble Jurisdictional High Court and other High Courts which has been followed by the Ld. CIT (A), therefore, we do not find any merits in the grounds raised by the department and accordingly the assessee’s current claim is allowed which is in lying with the judicial precedence of the aforesaid High Court judgments. Appeal of the revenue is dismissed.
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2018 (6) TMI 1826 - ITAT CHENNAI
Disallowance of deduction claimed u/s 54B - HELD THAT:- In the case of the co-owner Shri Keshav Sunderam Rajam [2017 (12) TMI 1852 - ITAT CHENNAI] this Tribunal remitted the matter back to the file of the AO. AO was directed to re-examine the matter afresh in the light of the material that may be produced by the assessee and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee.
Since the present assessee is also one of the co-owners of the property, for the sake of consistency, this Tribunal is of the considered opinion that the matter needs to be re-examined by the AO - Accordingly, the orders of both the authorities below are set aside and the issue raised by the assessee is remitted back to the file of the AO. AO shall re-examine the matter in the light of the material that may be produced by the assessee, more particularly the Adangal extract and other relevant documents, and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee. Appeal filed by the assessee is allowed for statistical purposes.
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2018 (6) TMI 1825 - ITAT DELHI
TP Adjustment - selection of certain comparables - HELD THAT:- Companies rejected on functional dissimilarity as well as the RPT more than the threshhold limit.
Disallowing re-imbursement of travelling and conveyance expenses and the reimbursement of Salary and Allowance u/s 40 (a) (i) - HELD THAT:- As decided in own case [2017 (9) TMI 1024 - ITAT DELHI] AR submits that while computing the disallowance u/s 40(a)(i) of the Act the AC should have considered the factual situation that has a bearing on the computation of disallowance u/s. 40 (a) (i) of the Act. From a reading of the assessment order, we find that the Assessing Officer did not consider any further facts while complying with the directions of the DRP, as such, this fact needs verification at the end of the Assessing Officer, after affording an opportunity to the assessee to furnish the requisite details that have a bearing on the disallowance u/s. 40 (a) (i) of the Act. We, therefore, set aside this aspect to the file of the Assessing Officer.
Respectfully following the order of the Tribunal in assessee’s own case in the preceding assessment year we deem it proper to restore this issue to the file of the Assessing Officer/TPO for adjudication of the issue afresh.
Delayed contribution made to Employees Provident Fund (EPF) - HELD THAT:- It is an admitted fact that the contributions to employee’s provident fund though deposited beyond the prescribed date as per the PF act, however, the same has been deposited prior to the due date of filing of return of income. The coordinate Benches of the Tribunal are taking the consistent view that where the EPF is deposited prior to due date of filing of return of income, no disallowance u/s. 43B or 2 (24) (x) read with 36 (1) (va) can be made. Since admittedly the EPF has been deposited prior to due date of filing of return of income, therefore, we hold that no disallowance is called for in the instant case. We, therefore, direct the Assessing Officer to delete the disallowance. The ground raised by the assessee on this issue is accordingly allowed.
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2018 (6) TMI 1824 - CALCUTTA HIGH COURT
Jurisdiction of AO over the assessee - appeal carried by the ACIT-39 to the Appellate Tribunal was dismissed as not competent - HELD THAT:- Assistant Commissioner of Income Tax-39, who had no jurisdiction over the assessee, carried an order in appeal to the Appellate Tribunal against an order passed by the Commissioner (Appeals). At the relevant time, the ITO-44 had jurisdiction over the assessee.
The appeal carried by the ACIT-39 to the Appellate Tribunal was dismissed as not competent. The order of the Appellate Tribunal was challenged by the Revenue in this Court. This Court did not interfere with the order of the Tribunal and the matter rested there without this Court’s order being challenged by the Revenue before the Supreme Court. In the present case, the matter pertains to the same assessment year when the ITO-44 has preferred an appeal where the initial assessment was not done by the ITO-44 but such assessment was conducted by the ACIT-39 at a point of time when ACIT-39 lost jurisdiction over the assessee pursuant to the said CBDT Notification of 2002.
Since there was a fundamental error, the Appellate Tribunal dismissed the appeal as incompetent since the order of the AO who had no jurisdiction to undertake the assessment qua the assessee could never have been found to be legal or resurrected.
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2018 (6) TMI 1823 - ITAT AHMEDABAD
Disallowance of depreciation on the amount of cost of plant & machinery incurred as reimbursement to Gulbrandsen Chemicals Inc., USA - as alleged that the assessee has neither reduced the amount form the cost of asset nor disallowed the depreciation - HELD THAT:- We find that the expenditure were pertaining to professional fees for setting-up of the Plant and the travelling cost of the Architects etc. which were incurred by Gulbrandsen Chemicals Inc., USA, and were paid by it on behalf of the appellant to external third parties during the period from 2000 to 2002. We noticed that before the AO that it had set-up its Plants during the period of 2000 to 2002 in India.
As per the appellant in this phase, it had very limited organizational and functional resources and therefore Gulbrandsen Chemicals Inc., USA assisted it in Plant set up phase engaging external service providers (such as Plant Consultant, Architect etc.). We hold that any expenditure incurred in relation to creation of a capital asset should be capitalized to the relevant asset. Appellant accordingly it also capitalized the amount of Rs. 1,42,66,483/- spent for setting up of the Plants to the respective plants account in FY 2006-07 when it received debit notes from Gulbrandsen Chemicals Inc., USA for such reimbursement. They made the payment.
A.O. has invoked Section 43A on the basis of misconception in as much as receipt was for reimbursement from the company and same was the debit to the company and this aspect is not disputed. On account of aforesaid discussion, we allow the appeal of the appellant and direct the A.O. to allow excess depreciation - We allow this ground of appeal.
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